|

US manufacturing sector recedes for the third month but new export orders soar

  • The October purchasing managers’ index for manufacturing registered 48.3 up from 47.8 in September.
  • Employment index rises 1.4 to 47.7, new orders gain 1.8 to 49.1.
  • The new export orders index soars 9.4 to 50.4.

American manufacturing contracted for the third straight month in October as the yet unsigned trade deal with China made little impact, but turns in key gauges suggest that the recovery may already have started.

The purchasing managers’ index from the Institute for Supply Management scored 48.3 last month missing the median forecast of 48.9 but up from September’s 47.8. Reading below 50 indicate that sector or business line had contracted. 

Reuters

September’s measure had been the lowest since May 2009 one month before the end of the recession, and capped a year of decline from the third quarter’s 15 year top of 60.8.  The dip to 49.1 in August had ended 35 straight months of expansion.

The two year old trade war with China and the imposition of competing tariffs had been the largest drag on sentiment and activity in the manufacturing sector, which though only about 15% of US GDP is considered a leading indicator for economic direction.

The index of production dropped to 46.2 in October from 47.3, order backlogs were just 44.1, the sixth month in a row of decline and down from 45.1 in September.  Prices also decreased for the fifth month at 45.5.

However, two important indexes rose, employment from 46.3 to 44.7 and new orders from 47.3 to 49.1.  And perhaps most surprisingly new export orders jumped 9.4 points from 41 to 50.4, putting it back, if only weakly, into expansion.

Reuters

Reuters

Opinions from the surveyed executives also showed recovery. “Comments from the panel reflect an improvement from the prior month, but sentiment remains more cautious than optimistic,” noted Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee in the accompanying statement.

Author

Joseph Trevisani

Joseph Trevisani began his thirty-year career in the financial markets at Credit Suisse in New York and Singapore where he worked for 12 years as an interbank currency trader and trading desk manager.

More from Joseph Trevisani
Share:

Editor's Picks

AUD/USD bounces off nearly two-month low; upside seems limited

AUD/USD rebounds from its lowest level since April 13, touched during the Asian session on Monday, as the US Dollar pauses following Friday's upbeat US NFP-led blowout rally to a two-month high. However, persistent geopolitical uncertainties, along with surging bets on Fed rate hikes, might continue to act as a tailwind for the USD. Furthermore, diminishing odds of a near-term RBA rate hike should cap gains for the Aussie.

USD/JPY bulls seem hesitant amid intervention fears

USD/JPY touches a fresh high since late April following an Asian session dip, though intervention fears limit losses for the Japanese Yen (JPY) and cap the upside. This counters Japan’s revised GDP print, which confirmed that the economy lost momentum in the first quarter. Meanwhile, Friday's upbeat US NFP report lifted bets of a Fed rate hike and favors the US Dollar bulls, backing the case for a further move higher for the currency pair.

Gold recovers slightly from the $4,300 neighborhood; not out of the woods yet

Gold attracts some buyers at the start of a new week and reverses part of Friday's decline to its lowest since March 24, around the $4,300 mark. The US Dollar pauses after Friday’s upbeat US NFP-led blowout rally to a two-month high and supports the bullion. However, a surge in bets on a Fed rate hike, along with geopolitical uncertainties, favors USD bulls. The backs the case for the emergence of fresh sellers around the precious metal at higher levels.

Week ahead: Fed countdown begins amid US inflation data and geopolitical risks
The countdown to the biggest event of the year so far, the first Fed meeting under Chair Warsh on June 17, has officially commenced. Next week’s key events could serve as the best appetizer for Warsh’s first press conference, although market participants will probably be distracted by developments elsewhere.
Week ahead – Fed countdown begins amid US inflation data and geopolitical risks

Fed Chair Warsh’s first meeting approaches as key US inflation data could reshape expectations. Oil prices remain elevated as US-Iran talks continue; tariffs also return to the spotlight. ECB is expected to hike; will it be a one-off move or is July live?

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.