Manufacturing Reports Offer Differing Outlooks

A marked upturn in new orders leads a very positive manufacturing PMI which finished October at 53.4, up 2 tenths from mid-month and up a convincing 1.9 points from September. The increase in orders is centered in domestic demand though export orders also improved. Backlogs are another plus, rising to the best level in three months.

Other strengths include gains for production, active building of inventories together with increases in purchase activity. Hiring during the month also increased though modestly.

The bulk of the readings in this report are at their best levels since this time last year. And confirming the strength is upward pressure on input costs that is being passed through to selling prices, the latter surging to a 5-year high. Based on this report, the manufacturing sector, after a flat year, is now accelerating into year end.

...meanwhile...

ISM's manufacturing sample reported no better than moderate conditions in October with the composite index at 51.9 which however is still 3 tenths better than Econoday's consensus. But new orders are a disappointment, still showing monthly growth but, at 52.1 vs September's 55.1, at a much slower rate. Backlog orders, at 45.5, are even softer, holding below 50 for a 4th month in a row to indicate contraction. A positive for orders is a steady though moderate rate of growth for new export orders, at 52.5 for a 1/2 point gain.

Production did pick up speed in the month, up 1.6 points to 54.6, while employment moved from 49.7 and back over 50 for the first time since June, to 52.9. Input costs also point to steady demand, rising 1.5 points to 54.5.

Recent History Of This Indicator:
The ISM manufacturing index for October is expected to post a second straight plus 50 reading, at a consensus of 51.6 but little changed from 51.5 in September. New orders in September, at 55.1, were very solid which should be a plus for the October report. Still, this report, like the factory sector itself, has been very flat this year with the headline oscillating near 50.