US ISM Manufacturing PMI Released

Alan Penny

3 January 2020

3 min read

dollar bills and pennies

  • ISM Manufacturing PMI misses
  • Construction Spending month over month rises
  • ISM Manufacturing Prices stronger than anticipated

Early on Friday, the United States released a handful of economic announcements in preparation for the FOMC Meeting Minutes, which should be a bit of a nonstarter.

The ISM Manufacturing PMI figure, the Construction Spending month over month, and the ISM Manufacturing Prices were all simultaneously announced. This is the latest in a handful of indicators coming out the United States that show a mixed bag.

The latest in a series of soft figures

The big headline announcement would be the ISM Manufacturing PMI figure, coming out at 47.2 as opposed to the anticipated figure of 49. This was much worse than anticipated and marks the latest of a handful of rather soft figures coming out the United States. In fact, the PMI figure is contractionary, which is not a good sign to say the least.

the PMI figure is contractionary, which is not a good sign

Construction Spending month over month came out at 0.6%, which was better than the anticipated 0.4%. It was also revised for the previous month at 0.1%, instead of the previously announced -0.8% figure. Finally, we got ISM Manufacturing Prices coming in at 51.7. This shows inflation which, in relation to the expected 47.7 figure, is relatively strong.

In other words, we found a mixed bag of figures when it comes to the US economy, which is something we are continually seeing this winter.

Not necessarily a dire situation

Going forward, people will continue to pay attention to these US economic figures and notice a trend of underperformance. That is not a good sign, and therefore one will have to wonder whether or not the US dollar will continue to perform as strong as it has recently.

Furthermore, stock markets will be very reactive. However, the initial reaction by the S&P 500 was one of strength, perhaps in anticipation of the Federal Reserve having to loosen monetary policy in 2020: something that’s becoming a real possibility.

As a result, stock market traders will start to look at all that “cheap money” as a reason to start buying equities again. This has been the way the market has played out over the last decade or so, so this is a trade that should continue to work going forward.

Stock markets have been going higher, and there’s no need to fight that. The US dollar may loosen up a little bit, and that should also throw more money at the stock market.

While the United States has been reporting softer figures, it isn’t necessarily a dire situation. This is especially true considering that the rest of the world looks so poor. Because of this, the United States will probably still outperform, although the reasons for equity markets outperforming probably just shifted a bit.

The currency markets may show a different side as to whether or not they like the greenback, but that’s an entirely different set of circumstances. 2020 is starting out much like 2019 ended, with traders taking on quite a bit of risk, especially considering all things going on around the world geopolitically.

Written By
Alan Penny

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