This morning's release of the ISM Manufacturing report came in better than expected (50.9 vs 50.5) and rose back above 50 after last month's dip to 49. Underneath the surface, today's report was also positive. As shown in the table below, just three components declined during the month. One of those components that declined was employment, which dipped below 50 for the first time since 2009, so that will be sure to heighten concerns heading into Friday's employment report.
Compared to a year ago, today's report was even stronger, as the only two components that declined were Customer Inventories and Employment. Relative to both last month and last year, Production and New Orders both increased, so that is a signal that demand remains positive. All in all, today's report was positive, but we would prefer to focus more attention on the ISM Non Manufacturing survey, which will be released on Wednesday. In our view, that is a much better representation of the US economy.