Institute For Supply Management Monthly Manufacturing Report Skirting Near Contraction

For a third straight month, the ISM is skirting near contraction, at 50.1 in October vs 50.2 and 51.1 in the prior two months. These readings do not point to contraction, which is what the factory sector has actually been in over the last year, but they are the lowest run for this report of the recovery.

New orders are showing some life, up nearly 2 points to a 52.9 reading that is safely above breakeven 50. Production is also at 52.9. But other readings are not as a favorable. Backlog orders remain in deep contraction at 42.5 while employment, for the first time in six months, is also in contraction, down nearly 3 points to 47.6. Exports have been the difference this year for the factory sector and new export orders in this report, at 47.5, remain below 50 for the fifth straight month. Prices, at 39.0, extended their long run of contraction.

Unlike the regional Fed reports, this report is not pointing to contraction for the factory sector, only to no change from what were already limited levels. No matter what report you pick, the factory sector isn't exactly on fire.

Recent History Of This Indicator:
A sub-50 reading for the ISM manufacturing index could be a jolting wake-up call that the export-hit manufacturing sector is in contraction. The ISM is closely watched not only in the markets but within the factory sector itself where company forecasts are often based on the results. This report, unlike actual government data, hasn't yet pointed to outright contraction for the sector. The Econoday consensus is calling for a 50.0 reading in October, one that would point to no change in activity from September.