In October, the US manufacturing ISM rose unexpectedly, reaching a new 2.5-year high. The manufacturing ISM increased from 56.2 to 56.4, while the consensus was looking for a limited pay-back (to 55). The details show a limited slowdown in production (60.8 from 62.6) and employment (53.2 from 55.4), while new orders stayed broadly unchanged from the previous month (60.6 from 60.5). Backlog of orders (51.5 from 49.5), inventories (52.5 form 50) and customer inventories (47.0 from 43.0) picked up from their September levels, although remaining quite muted. Growth in new export orders (57.0 from 52.0) and supplier deliveries (54.7 from 52.6) accelerated during the month, while imports stayed broadly unchanged from their September levels (55.5 from 55.0).
Overall, it is encouraging to see that sentiment was barely affected by the government shutdown and political uncertainty, although the headline reading was supported by positive seasonal adjustment factors. The underlying picture shows some cautiousness regarding new hiring while also inventories remain tight, but overall the manufacturing ISM indicates that manufacturing sentiment continued to recover at the start of Q4, despite the political crisis in the US.