The manufacturing ISM for August provided us finally with some “good” news, suggesting that the sector stayed out of recession (at least for now). The headline index dropped only marginally, from 50.9 to 50.6, while the consensus was looking for a plunge to 48.5. The details are less encouraging with production falling from 52.3 to 48.6, below the 50 level and also new orders stayed in contraction territory, even if they picked up slightly from July (49.6 from 49.2). New export orders (50.5 from 54.0) and employment (51.8 from 53.5) weakened too, while backlog of orders (49.6 from 49.2), supplier deliveries (50.6 from 50.4), inventories (52.3 from 49.3), customer inventories (46.5 from 44.0) and imports (55.5 from 53.5) improved compared to the previous month. Upward price pressures eased further with prices paid falling from 59.0 to 55.5. The manufacturing ISM suggests that the slowdown in growth is less dramatic than most had feared and offers some hope that the US economy might escape a new recession. However, after the sharp decline in the previous month, the “stabilization” might be nothing more than a pause. The payrolls today should provide us with more information on the health of the US economy.
In the week ended the 27th of August, US initial claims dropped from an upwardly revised 421 000 to 409 000, close to the consensus estimate of 410 000. The 4-week moving average, on the contrary, jumped somewhat higher, rising from 408 500 to 410 250. The labour department added that there were no special factors that affected the claims last week and there was also no indication of influence from the (35,88 USD, -0,80%) strike. Continuing claims, which are reported with an extra week lag surprised on the upside, but this was mainly due to a sharp upward revision in the previous week’s data (to 3 753 000 from 3 641 000). In the week ended August the 20th, continuing claims dropped by 18 000 to 3 735 000. The initial claims remain at rather low levels as the automotive industry is continuing to put downward pressure on the seasonally adjusted claims, while claims increased in the construction and services sector.