• Sentiment expected to remain positive despite China.
  • Business investment was unexpectedly strong in January.
  • Equity losses and the Fed on the near term horizon.

The Institute for Supply Management (ISM) will issue its purchasing managers’ index (PMI) for the manufacturing sector in January on Monday, March 2nd at 15:00 GMT, 10:00 EDT.


The purchasing managers’ index is expected to slip to 50.5 in February from 50.9 in January and 47.8 in December.  The prices paid index is predicted to fall to 51.5 from 53.3.  The new orders index is predicted to drop to 49.8 in February from 52 in January.  Employment will be unchanged at 46.6.

US manufacturing and the economy

Manufacturing PMI


The unexpected jump into expansion for the manufacturing sector in January at 50.9 in the purchasing managers’ index after five months in contraction was due as much to optimism from the completed US-China trade deal as from any large boost to business, though new orders did claim 52 after the same five months below 50 as the overall index.

Manufacturing has been in a slow-motion decline for almost two years as the trade dispute sapped first outlook then orders and eventually employment.  The descent did not reflect the general US economy which grew 2.3% for the year on a quarterly average and continued to produce large numbers of new jobs, albeit not in the factory sector.

Unemployment has remained near half-century lows and wages are near their best levels in a decade. Consumer sentiment has climbed to the higher reaches of its post-recession range not surprisingly considering the labor market and is at levels seen only twice before.

Business investment

Planning and investment in the business community suffered the greatest impact from the US-China trade argument. The non-defense capital goods category of durable goods, the well-known analog for business investment, reversed in the second half of 2019, posting a small negative monthly average.

Non-Defense Capital Goods


Analysts had expected any rebound to be delayed until orders and purchases began to flow from China. The wholly unanticipated surge of spending, up 1.1% in January on a median projection for a 0.1% gain, indicated that business planners were confident in the pending benefits of the trade deal.

Equities and the Fed

While the actual effect of the virus on the Chinese economy and by extension around the globe is unknown, the fearful crushing of equity markets in the most rapid correction in history dominated headlines last week. American stocks are down about 12% without any appreciable change in the US economic situation.

Federal Reserve Chairman Jerome Powell said that the bank is ready to reduce the fed funds rate if necessary to maintain the country’s longest expansion.

Yields on US Treasuries have already fallen to record lows as investors around the world sought the safety of the US economy and financial markets.

“The fundamentals of the U.S. economy remain strong,” Powell noted in a four-sentence statement on Friday. “However, the Coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”


The extent of the Coronavirus on the economy of China is unknown although the assumption that it will be large is rife in the markets.   

Business investment is a long term project with spending and return horizons to several years.  The health crisis in China is logically expected to put a serious dent in the immediate performance of her promises under the US-China trade accord.  

Will the acknowledged future benefits of the trade deal be sufficient to maintain a positive outlook in the manufacturing sector as the near damage from the partial shuttering of the Chinese economy is accounted?  Despite the fears clearly evident in markets, business planners are likely to take a more constructive and long-term approach.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content

Recommended Content

Editors’ Picks

AUD/USD regains 0.6500 ahead of RBA’s decision

AUD/USD regains 0.6500 ahead of RBA’s decision

The AUD/USD pair trades around 0.6510, underpinned by the broad greenback’s weakness and substantial gains on Wall Street. Market players now await the Reserve Bank of Australia monetary policy decision.


EUR/USD holds on to gains above 0.9800

EUR/USD holds on to gains above 0.9800

The EUR/USD pair trades around 0.9820, marginally higher amid a better market mood. Tepid EU data put a cap on the shared currency alongside persistent tensions with Russia over energy deliveries.


Gold bulls aim to challenge the $1,700 threshold

Gold bulls aim to challenge the $1,700 threshold

Gold picked up momentum after Wall Street’s opening, and runs above $1,690.00 a troy ounce, trading at its highest in three weeks. The greenback sheds ground on the back of the better performance of equities, coupled with tepid US data.

Gold News

Cardano could be set for 12% gains just this week alone

Cardano could be set for 12% gains just this week alone

ADA could set itself up this week for a perfect opportunity to go long in a bear market. Markets may experience some risk-on this week, with markets potentially set to jump, and equities and a weaker dollar offering some room for cryptocurrencies to rally in.

Read more

Who sabotaged the Nordstream pipelines?

Who sabotaged the Nordstream pipelines?

Putin said it would be stupid for Russia to have done it. And he’s right. If nothing else, Gazprom would be in breach of contract, not that contracts are respected in Russia. On the principle of cui bono (who benefits), the saboteur could be someone pro-nuclear, or maybe a coal mining company, or a climate denier, or some 5th column pro-Russia gang from within W.

Read more