economy Markets

ISM Miss Adds To ‘Cooling’ Narrative As Rebound Drags On

Rounding out a deluge of Thursday data was ISM, which missed for September, albeit not in egregious fashion.

The market was looking for 56.5 but got 55.4 instead. Again, not “bad”, but perhaps indicative of cooling sentiment as the economy settles in after the post-lockdown bounce.

The range of estimates for September was 54 to 58. New orders dropped precipitously, albeit from nosebleed levels.

The breakdown is generally favorable. Again, new orders dropped, as did production, but the rest doesn’t offer anything to fundamentally alter the narrative.

Of course, there really is no such thing as “the” narrative. There are any number of narratives depending on your own, subjective take about the election and how the economy is likely to evolve post-pandemic. So, there are narratives, plural. But whatever your narrative is, September ISM probably doesn’t change it. That’s the point.

Employment rose to the brink of expansion territory at 49.6. That’s the highest since July of 2019, and I’d note it comes on the heels of an ADP report which showed firms added 130,000 manufacturing jobs last month.

Prices paid jumped to the highest in nearly two years.

The same cautionary spin put on jobless claims and every other data point of any consequence is applicable here: It’s likely that momentum will continue to fade absent additional stimulus.

That doesn’t mean the rebound hasn’t been faster and more robust than expected in some sectors. In fact, it underscores the unexpectedly strong bounce: The post-lockdown economic recovery is perhaps a rare case when an object in motion (the economy) will not, in fact, stay in motion. Larry Kudlow’s bottomless bag of superlatives notwithstanding.


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