US ISM Manufacturing: back above 50 - Wells Fargo

Analysts from Wells Fargo, explain that the ISM rose back into expansion territory (above 50) but warned about the signals from inventories. They point out to the ISM non-manufacturing index, that will be released on Thursday and could give important clues about Friday’s employment report.

Key Quotes:

“A September bounce-back puts the ISM manufacturing index firmly back into expansion territory at 51.5. New orders and production both made the same crossing, but there is a warning signal flashing for inventories.”

“One robin doesn’t make it spring and one sub-50 reading from the ISM doesn’t make it a recession for manufacturing. When the August print for both the ISM manufacturing and non-manufacturing came in below the breakeven 50 we said at the time that the weakness “looks somewhat exaggerated.” We pointed to the generally upbeat comments which did not jibe with the ugly headline reading.”

“Manufacturing payrolls increased a total of 14,000 jobs in June and July before August layoffs in the sector gave all those jobs back. Just days before the jobs report on Friday, we learned today that the employment component of the ISM manufacturing index remained in contraction territory in September, but just barely so at 49.7. The employment component of the ISM non-manufacturing index on Thursday will also be a key piece of final data prior to Friday’s jobs report for September. This will be the last employment report the Fed will have to review at its

meeting on November 1 and 2. Given the proximity to the election, we think that meeting is not in play, although December certainly is.”