Growth Firms Slightly In PMI Composite Index

Growth has firmed slightly in both the PMI manufacturing and PMI service samples so far this month, lifting the PMI composite by 1.4 points to a higher-than-expected 54.8.

The manufacturing flash is at 55.9 which is the strongest showing in five months. New orders, with the notable exception of export sales, are described as strong as is employment where October's gain is the strongest of the year. Capacity constraints are evident in the sample especially lengthening delivery times which are the most severe of the expansion. Costs are up on both metal tariffs and oil prices with pass through at among the highest rates of the last seven years.

The service PMI is at 54.7 with strength also including new orders where gains are described as "robust". A note of caution ahead of Friday's employment report is a slow rate of hiring in this sample, the slowest since June last year and due in part to lack of available candidates. Price pressures are also strong with input costs at a 5-year high and amid reports of pass through to customers.

These results point to a fast start to the fourth-quarter and will lift expectations for the coming ISM manufacturing and non-manufacturing reports.