US ISM index: A welcome rebound - ING

James Knightley, Senior Economist at ING, points out that despite today’s rebound in the ISM index, data still suggests that manufacturing activity during the third quarter was weaker than the second quarter.

Key Quotes:

“The US ISM manufacturing index has risen more than expected to stand at 51.5 in September versus 49.4 in August. The consensus expectation was for a reading of 50.4. The rebound was led by a 3.2 point increase in production and a six point jump in new orders. However, neither are as strong as the readings seen in June or July while new orders remains below its six month moving average. So, while the improvement is better than hoped, the index is suggesting that manufacturing activity in 3Q16 was weaker than seen in 2Q16.”

“Looking to Friday’s payrolls figure, the ISM employment component has offered encouragement to us regarding our above consensus 210k prediction for job creation. This index rose to 49.7, up from 48.3, while also rising above the six month moving average of 49.4. With the consumer confidence report showing a marked pick-up in households feeling that jobs are “plentiful” the signs look pretty good for a decent rebound following a rather disappointing 151,000 gain last month.”