US Manufacturing: Contraction continues but moderated - Wells Fargo

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 1, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Córdoba) - According to analysts from Wells Fargo, despite today’s increase, the ISM manufacturing index continue to signal weakness in the sector that accounts for the 12% of the output in the economy.

    Key Quotes:

    “The ISM manufacturing index edged up in January, but at 48.2 continues to signal declining activity in the manufacturing sector. Annual revisions showed recent weakness has been a bit more pronounced. Activity is now reported to have contracted beginning back in October, which makes January the fourth straight month of sub-50 readings. Still the index remains above 43.1, the level consistent with a broad contraction in the economy.

    Employment conditions in manufacturing deteriorated more quickly, with the index falling to 45.9—the lowest reading this cycle.”

    “The prices paid component continues to signal deflation in the industrial sector and little pricing power for businesses (…) Prices paid have been in negative territory for 15 consecutive months—the longest streak since 1998-1999.

    “It is worth reiterating that manufacturing is not the entire U.S. economy. The factory sector accounts for only 12 percent of output in the economy and 9 percent of employment. Manufacturing is more exposed to the predominant challenges currently facing the economy—sluggish global growth, the strong dollar and falling commodity prices. However, the longer the pullback in manufacturing drags on, the greater the risk that weakness spills over into other sectors. For now at least, the ISM indicates the trend in activity did not worsen in January.”
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