US: ISM preview, October

Fri, Oct 29 2010, 16:02 GMT
by Signe Roed-Frederiksen

In September the US manufacturing ISM index turned out in line with expectations, decreasing from 56.3 to 54.4. This, however, mirrored much weaker details, with particularly weakness in the new orders index. This meant a further deterioration in the ‘new order’ vs. ‘inventories’ differential, suggesting that the ISM will resume its downward trend over the coming months.
The local surveys have been on balance positive in October, with the majority printing increases. Particularly Empire, Philly, and Chicago showed strong details. Overall the local surveys are signalling that the ISM should increase on Monday.
On Monday we expect the ISM to increase (in contrast to consensus expectations) by a moderate 0.2 points to 54.6. Importantly, we expect this improvement to be temporary in nature and look for the downward trend in the ISM to continue in the following months.
In the coming months we expect the ISM to continue to move lower, although at a slower pace than previously suggested. We expect ISM to reach a year-end level around 52 and look for a turnaround in early 2010.

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Published On Fri, Oct 29 2010, 16:04 GMT

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