US: Firming in factory continues - Wells Fargo
|Analysts from Wells Fargo, point out that today’s report of October Factory orders (2.7% vs 2.6% expected) is the four consecutive monthly gain. They mentioned a triple threat for the manufacturing sector: low commodity prices, soft global growth and a stronger US dollar.
Key Quotes:
“Factory orders increased 2.7 percent in October notching the fourth consecutive monthly gain. Perhaps it is a commentary on the state of manufacturing to note this is the longest stretch of consecutive gains since 2009.”
“Shipments of non-defense capital goods orders ex-aircraft (core capital goods) are a proxy for business spending as they roll into the Bureau of Economic Analysis’s calculation of GDP. These core capital shipments edged 0.1 percent lower in October. This is downward revision from the number first reported in the durable goods report. However, it bears noting that September’s core shipments number was revised from a 0.4 percent gain to a 0.5 percent increase. This is a good, if somewhat modest, transition to the fourth quarter for equipment spending.”
“The manufacturing sector has struggled against the triple threat of low commodity prices, soft global growth and a strong U.S. dollar. There are signs the logjam is starting to break. Commodity prices have turned higher, particularly oil prices which have surged in the wake of the late November OPEC decision to scale back production. As of this writing, both WTI and Brent crude prices are north of $50/barrel, a roughly 20 percent increase since November lows.”
“The dollar, on the other hand, has not been a big help. A broad, trade weighted measure of the dollar has increased 3.5 percent since the U.S. election.”
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