The manufacturing PMI improved further in October, finishing the month
at 51.3 versus 51.5 for the mid-month flash and against 51.1 and 50.3 in
September and August, the latter a 10-year low. Markit's sample
reported the best growth rates for new orders and production in six
months and the most hiring in five months. Price data remain subdued
with lower metal prices holding down input costs and selling prices
showing no change.
Turning back to orders, foreign demand picked
up slightly for this sample following three straight months of
contraction. Overall optimism is moderate but at a four-month high and
the sample, in a sign that demand is picking up, drew down inventories
to keep production moving and to meet order demand.
...meanwhile...
On the low side of expectations but not at increasing rates of
contraction are the results of ISM's manufacturing report for October.
At 48.3, the index missed Econoday's consensus by 1 point but gained a
1/2 point from September. New orders improved nearly 2 points in October
but, at 49.1, are still under breakeven 50. New export orders, however,
improved markedly, up more than 9 points and back over 50 at 50.4. Yet
total backlogs are a major weakness for ISM's sample, down another point
and in deep contraction at 44.1.
Elsewhere contraction is
roughly as deep as September, including production down nearly a point
to 46.2 and employment up 1.4 points but still under 50 at 47.7. The
sample drew down their raw material inventories but less so than
September while, in a sign that capacity constraints are minimal,
supplier delivery times posted a rare outright decline in the month.
Given the indication from delivery times, the prices paid index is not
surprisingly pointing to lower prices, down more than 4 points to 45.5.
The
good news in this report is the rise in export orders, a move confirmed
by the PMI manufacturing report which was released earlier this
morning. Yet overall conditions are still very soft and are not pointing
to any year-end acceleration for a sector that has been holding back
the 2019 economy and where export-related trouble has helped trigger
three straight rate cuts from the Federal Reserve.
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