By Jennifer Coombs
Despite a slight slowdown month over month, the rate of growth in ISM's manufacturing survey sample remains incredibly strong, and well beyond other reports, especially government data which have been flat. ISM's reading for the Manufacturing Purchasing Managers' Index (PMI) came in at 58.7 for the month of November which came short of the October reading of 59.0, but still near recovery highs. The new orders component is usually the point of interest in PMI reports, and this time was no exception. New orders came in at a whopping 66.0 compared to October's 65.8 with total backorders up to 55.0, which is a very strong reading.
As the chart below indicates, new orders have been climbing nicely since January 2014. The employment component was solid at 54.9 though slightly lower than the 55.5 reading in October. Production was strong though slightly lower at 64.4 in November versus 64.8 in October. Strength could also be seen from a decline in delivery times as well as steady inventory levels. The elephant in the room this time was a notable contraction in input prices at 44.5 compared to the 53.5 level in October. This is the first reading in contractionary territory since last July, and reflects the decline in oil prices; however there were notable declines in the prices of apparel, textiles, food, machinery and electrical equipment among others. Prices only appeared to increase in furniture and paper-related products.
All in all, we feel it's difficult to make conclusions on this sample as there has been mixed readings in the Fed district manufacturing reports. Nevertheless, the market still managed to move off of intra-day lows following ISM's report and this is a great sign.