Last night, ISM Manufacturing PMI beat estimate and increased to 49.5 (prior 48.2, forecast 48.5) highest in 5 months. Although, ISM Manufacturing PMI have been in negative territory. A PMI of more than 50 represents expansion of the sector. A reading under 50 represents a contraction.
Wells Fargo’s Economist said, The ISM manufacturing index rose almost to the break-even. At 49.5, it is roughly sideways, but at least not worse. Production and orders are expanding and employment improved. Input prices remain weak.
The new orders index (middle graph), the most forward-looking component of activity, remained positive at 51.5, corroborating last week’s gains in durable goods orders.
The prices paid component continues to signal deflation in the industrial sector and little pricing power for businesses (bottom graph). The price index increased to 38.5 with only the fabricated metals industry indicating that it paid higher prices. Prices paid have been in negative territory for 16 consecutive months—the longest streak since 1998-1999. Weaker input prices are consistent with continued weakness in core finished goods PPI and reinforce the message that inflation pressures remain muted relative to the FOMC’s expectations of two percent inflation anytime this year.
Reference : Wells Fargo's Economic Indicators Report, CME Group FedWatch, Trading Economics
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