The November PMI is up 1.6% with a reading of 59.3% according to the ISM report released earlier today. The ISM is a key measure which shows factory activity throughout the US - November’s reading significantly outperformed previous expectations.
Key Takeaways
- The Employment Index came in at 54.8%, a 1.6% increase from October’s 56.8%.
- The Supplier Delivery Index registered a reading of 62.5%, a 1.3% decrease from 63.8% in October.
- The Inventories Index read 52.9% compared to 50.7% in October, a 2.2% increase.
- The New Orders Index came in at 62.1%, a 4.7% increase over October’s 57.4%.
- The Production Index registered 60.6%, a 0.7% increase compared to October’s 59.9%.
The biggest decrease was seen in the Prices Index which registered 60.7%, a 10.9% decrease from October’s 71.6% which points to higher prices of raw materials for the 33rd month in a row.
The data is monitored to determine whether the three-year tightening cycle implemented by the Federal Reserve is nearing an end with the fourth rate hike of 2018 still on the cards this December. Recently-released minutes from the last FOMC meeting show that a fourth rate hike is considered likely by the majority of meeting participants, although the monetary policy for 2019 is less clear.
While factory activity is up, the major decrease in prices also has to be considered. The drop from 71.6% to 60.7% is dramatically below the estimated reading of 70%.
Separate data from Markit shows a 3 month low in growth of the factory sector, although showing growth in new orders. Markit's Manufacturing PMI came in at 55.3 for November compared to 55.7 the month before, the lowest since August.
@ism PMI rebounded by 1.6 points to 59.3 in Nov, signaling continued expansion in the #manufacturing sector. 13 of 18 industries covered reported growth. Most components grew faster but prices appear to be growing at slower pace. Manufacturing will likely have a very strong 4Q. pic.twitter.com/8q2cdO19Be
— Thomas Kevin Swift (@DrTKSwift) December 3, 2018
Expert Outlook
“Prices pressure continues, but at notably lower levels than in prior periods. The manufacturing community continues to expand, with November adding positively to the three-month rolling PMI average," said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.
Meanwhile, senior CIMC World Markets economist Katherine Judge said:
"US manufacturing activity accelerated in November, reversing most of the dip seen in the prior month. The pickup was driven by broad-based improvement."
Market Reaction
Spot gold is up 0.90% today and trading at $1,231.13/oz with a daily high of $1,233.90/oz and low of $1,230.82/oz. The price has most likely been boosted by the stronger-than-expected data ISM PMI data which points to a firm manufacturing sector despite a cooling in growth in some areas.
Gold Price Chart
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