Lower US manufacturing sector momentum? - TDS

Ross J Burland FXStreet

Analysts at TD Securities noted that the US manufacturing sector momentum should leak lower for the second consecutive month.

Key Quotes:

"With the headline ISM manufacturing index falling to 50.2 in May from 50.8. The decline in the index is expected to be driven by weaker new orders activity (which should fall back to 52.4), while the production sub-index should also decline. The softening in manufacturing activity has been reflected in the regional Fed PMIs, with the Empire, Philly, and Richmond Fed indicators all falling sharply.

A weak ISM manufacturing performance would also be consistent with the observed declines in the Chicago and Markit manufacturing indicators, both of which have generally been good predictors of the direction for the ISM.

Risks to the forecast

The risks to this forecast are tilted to the downside, with the performance of new orders standing out as the key wildcard. For some context, the new orders, unfilled orders and orders backlog sub-indices in the Philly, Empire and Richmond Fed reports all fell sharply. A similar performance in the ISM manufacturing could push the headline index back into contractionary territory."

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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