Today's Report (12/01/2021)

According to the latest Manufacturing ISM Report On Business, economic activity in the manufacturing sector increased in November, with the overall economy growing for the 18th consecutive month.

The November Manufacturing PMI was 61.1%, a 0.3 percentage point increase from the October reading of 60.8%." This figure indicates that the overall economy is expanding for the 18th month in a row, following a contraction in April 2020. The New Orders Index was 61.5% in November, up 1.7 percentage points from the previous month's reading of 59.8%. The Production Index was 61.5%, up 2.2 percentage points from the October reading of 59.3%. The Prices Index was 82.4%, a 3.3 percentage point decrease from the previous month's figure of 85.7%. The Backlog of Orders Index was 61.9% in November, 1.7 percentage points lower than the previous month's reading of 63.6%. The Employment Index was 53.3%, 1.3 percentage points higher than the previous month's reading of 52%. The Supplier Deliveries Index was 72.2%, a 3.4 percentage point decrease from the previous month's figure of 75.6%. The Inventories Index was 56.8% in November, 0.2 percentage points lower than the previous month's reading of 57%. The New Export Orders Index was 54% in November, a 0.6 percentage point decrease from the previous month's reading of 54.6%. The Imports Index was 52.6%, up 3.5 percentage points from the previous month's reading of 49.1%.


Construction Spending Report

Construction spending during October 2021 was estimated at a seasonally adjusted annual rate of $1,598.0 billion, 0.2% (±1.2%)* above the revised September estimate of $1,594.8 billion. The October figure is 8.6% (±1.3%) above the October 2020 estimate of $1,471.7 billion. During the first ten months of this year, construction spending amounted to $1,323.1 billion, 7.5% (±1.0%) above the $1,230.8 billion for the same period in 2020.


Market Reaction

Following this release there was some slight upside movement on the S&P500


US ISM Manufacturing PMI

What is it?

It is the first monthly report on the economy with a focus on manufacturing.

What are the fundamental effects?

If there is a pickup in demand for manufactured goods, purchasing managers quickly respond by increasing orders for production materials and other supplies. If manufacturing sales slow, these corporate buys will cut back on their industrial order. It is an effective gauge for turning points in the business cycle and has a close link with GDP. A reading above 50 is believed to be consistent with GDP growth of 2.5%. Every full point in the index above 50 can add 0.3 percentage points or so growth over the year.

How does it affect the markets?

CURRENCY - The dollar may bounce higher with a PMI above 50.

STOCKS - Equity markets prefer lower interest rates and could rally with the bond market.

BONDS - The bond market will rally when the ISM manufacturing index is weaker than expected.

US ISM Manufacturing Prices What Is It?

It reflects a change in prices paid by industry representatives for the products or services they receive.

US ISM Mfg. Employment Index, What Is It?

The employment subcomponent is a diffusion index relating to corporate hiring plans. A reading above fifty suggests the net, manufacturing companies are planning to add labor. While a reading below fifty suggests that more manufacturing companies are looking to reduce labor. The employment sub-index accounts for 20% of the overall ISM manufacturing Index.

US ISM Mfg. New Orders, What Is It?

It reflects a change in new orders of industrial companies.

US Construction Spending, What Is It?

The dollar value of new construction activity on residential, non-residential, and public projects.