US manufacturing activity contracted for an 11th month in September, the first of this week’s top-tier US economic data showed.
The good news was that at 49, the headline ISM manufacturing print topped estimates. Consensus was 47.9. The range, from more than five-dozen economists who ventured a guess, was 46.5 to 50.
49 actually counted as the best reading since November. “Companies are still managing outputs appropriately as order softness continues, but the MoM improvement in September is a clear positive,” ISM’s Tim Fiore said Monday.
Meanwhile, the final read on S&P Global’s factory gauge for the US economy in September was 49.8, two points better than August and a non-trivial improvement from the flash print.
The overarching takeaway is that the long-running US manufacturing malaise is abating. Notably, production increased in both surveys. At 52.5, the ISM production print was the highest in 14 months. Fiore emphasized that the share of sector GDP registering a PMI below 45 was just 6% last month. That figure was 25% in July.
Mercifully, the ISM prices paid gauge receded all the way back to 43.8. You might recall that it ventured perilously close to 50 again the prior month, a disconcerting development for a Fed that needs goods inflation like it needs a hole in the head. That said, the S&P report flagged the fastest rate of producer cost increases in five months, “largely on the back of higher oil prices.”
On the employment front, the ISM factory jobs index rose to 51.2, solidly in expansion territory.
All in all, the updates painted an optimistic picture, or as optimistic as PMIs can be when the headline prints are still stuck below the 50 demarcation line.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, summed it up. “September saw a welcome near-stabilization of business conditions in manufacturing,” he said.
Of course, all eyes are on the US services sector at this point. The big question is whether the consumption impulse in America will slow enough in Q4 to cool down the engine of the world’s largest economy. If not, “higher-for-longer.”
