October ISM Manufacturing handily beat expectations this morning with the headline figure coming in at 56.9 versus expectations of 54.5. Robert Nore of ISM detailed the report:
“The manufacturing sector grew during October, with both new orders and production making significant gains. Since hitting a peak in April, the trend for manufacturing has been toward slower growth. However, this month’s report signals a continuation of the recovery that began 15 months ago, and its strength raises expectations for growth in the balance of the quarter. Survey respondents note the recovery in autos, computers and exports as key drivers of this growth. Concerns about inventory growth are lessened by the improvement in new orders during October. With 14 of 18 industries reporting growth in October, manufacturing continues to outperform the other sectors of the economy.”
Comments from respondents were more cautious and showing concern about rising input costs:
- “The dollar is weakening again, which is resulting in higher costs for our materials we purchase overseas. It is hurting our profit margins.” (Transportation Equipment)
- “Business slowing down but still double digit over last year.” (Chemical Products)
- “Currency continues to wreak havoc with commodity pricing.” (Food, Beverage & Tobacco Products)
- “Customers remain cautious, placing orders at the last minute, making supply planning a challenge.” (Machinery)
- “Our customer base — auto manufacturers — is expanding capacity and making major capital investments.” (Fabricated Metal Products)
All in all, this was a very good report with strong gains in new orders, employment and production.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.