US manufacturers hurt by strong dollar; ISM PMI shows sector contraction

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 5, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - Manufacturing sector in the US has been struggling for quite some time now to combat the negative impact of strong dollar and low oil price. The latest PMI figures, both ISM and Markit show that the sector has not been successful yet to post figures that would prompt recovery hopes.

    Market PMI data released yesterday showed US manufacturing activity in December decline to 51.2 from a preliminary reading of 51.3. However, it is slightly better than the 51.1 reading estimated. The manufacturing PMI for December is the lowest reading recorded since October 2012.

    Markit feels "A near-stagnation in new business volumes was the main factor weighing on the headline index in December. Measured overall, new order levels expanded only fractionally and at the weakest pace since September 2009.” Markit also noted existence of softer underlying demand conditions, intense competition for new work as well as subdued business confidence among clients. Export sales were also close to stagnation in December. Markit reiterated that manufacturers are hurt being hurt as strong dollar continues to weigh on demand from abroad.

    The Institute for Supply Management (ISM) manufacturing PMI also released yesterday revealed manufacturing in the US contracted in December. ISM's index came in at 48.2, lower than 48.6 recorded in November and also below the 49.0 estimated.

    The new orders Index increased 0.3 points to register 49.2, up from 48.9 recorded in November; while the production Index registered 49.8, higher than the November reading of 49.2. The employment index came in at 48.1, lower than the November reading of 51.3. The prices index also dropped 2.0 points from the November reading of 35.5. Prices paid registered the lowest component reading in the ISM report primarily because of the pressure of strong currency on foreign demand.ISM’s December's reading was the lowest since June 2009. The ISM data raises doubt on the pace at which the Fed said it would raise hikes this year.
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