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U.S. manufacturing index rises strongly; housing market strength continues
Nov 2, 2009
The U.S. manufacturing sector enjoyed a boost in October as the ISM manufacturing index rose to 55.7 from September’s 52.6 reading. This marks the strongest reading for the index since the April 2006 reading of 56. The production component rose to 63.3 from the prior month’s 55.7, and, while the new orders component retreated slightly from 60.8 in September to 58.5 in October, it remains at a high level.
Perhaps the most encouraging news came from the employment component, which reported a reading of 53.1 (also at its highest point since April 2006) putting it above the 50-mark, indicating that it is within expansionary territory. On the inflationary front, prices paid rose to 65 compared to an expected 64 reading.
Today’s ISM report points to continuing expansion within the manufacturing sector that is consistent with our view that the economic recovery is continuing in the fourth quarter. Notwithstanding the return of economic growth back into positive territory, labour markets remain weak and will take time to heal. At its interest rate decision scheduled for this Wednesday, we expect the Fed to announce that it is keeping the Fed funds rate in its current 0.00%-0.25% range. Attention will be placed on comments indicating whether the various “unconventional” stimulus measures will be pulled back.
Continued strength in U.S. housing market
Two other reports out this morning pointed to continued strength in the U.S. housing sector. Pending home sales for September rose 6.1% compared to the expected flat reading. Another report showed that construction spending shot up 0.8% in September compared to the -0.2% expected. The 3.9% rise in residential construction more than offset the -0.4% fall in non-residential construction for the month.
Josh Heller, Economist, RBC Economics Research
To view charts of today's data, go to
http://www.rbc.com/economics/html_calendars/ca/calendar.html (Canada)
http://www.rbc.com/economics/html_calendars/us/calendar.html (United States)
RBC Economics Research contacts:
Paul Ferley, Assistant Chief Economist
Dawn Desjardins, Assistant Chief Economist
Josh Heller, Economist
Go to Financial Markets Daily (pdf) for a daily summary of North American interest rates and foreign exchange rates.
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View trend charts of today's Canadian releases.
View trend charts of today's U.S. releases.
