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ISM data came in on the soft side this morning, with a sub-50 reading:

PMI10603

I would be a little cautious about saying that "manufacturing is contracting" based on a diffusion index. That said, the headline number suggests overall weakness. What is the source of that weakness? I think once again the external sector is a drag. While new orders were down slightly:

PMI20603

exports orders were down sharply:

PMI30603

But note that import orders held their ground:

PMI40603

Import orders should be a reflection of domestic demand. The steady reading in those suggests that manufacturing weakness in the headline numbers stems from external sources, which has not yet filtered broadly into the domestic economy.

That, at least, is the optimistic view. Also more optimistic was the 52.3 manufacturing number from the competing Markit report. But optimism aside, put this morning's ISM report under the "delay tapering" column.

Source: Manufacturing: Slow Start