“Less bad” rather than a “good” report – Wells Fargo


The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) Index came in at 48.3 in October, below expectations but above September’s reading. Along with other PMIs, the ISM points to factory activity stabilizing, but growth is not yet in the cards, explained analysts at Wells Fargo. 

Key Quotes: 

“After hitting a 10-year low in September, the ISM manufacturing index clawed back half a point in October. That was not enough to escape contraction territory, however, and left the index at 48.3. The rebound puts the ISM more in line with the Markit manufacturing index as well as the average of the regional Fed purchasing managers’ indices. Notably, however, the other indices remain consistent with industry eking out some growth. Taken together, manufacturing activity looks to possibly be stabilizing.”

“While manufacturing remains in the doldrums, the ISM along with other purchasing managers’ indices in the United States and abroad suggest that the situation has at least not gotten worse over the past month.”

“Today’s improvement in the ISM is certainly better than the alternative and hints at a possible bottom for the sector, but the manufacturing sector is far from out of the woods. We expect weakness in the sector to continue in coming months and therefore pose some risk of spilling over into service sector activity. While the October employment report suggested few signs of weakness spreading into services at present, we will get another key gauge on Tuesday with the release of the ISM non-manufacturing report.”

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