US Preview: ISM January Manufacturing PMI likely to drop

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

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    FXStreet (Mumbai) - The ISM manufacturing PMI will be released today at 15.00 GMT. The index is likely to come in at 48.0. The ISM’s Manufacturing PMI was revised down to 48 from an initially reported 48.2 in December 2015, marking the lowest reading since June 2009 on account of sharp decline in new orders, production, employment and raw materials inventories subindexes. December’s ISM PMI was significantly lower than November’s 48.6.

    Business Confidence in the United States averaged 52.79 percent from 1948 until 2015. It had reached an all time high of 77.50 percent in July of 1950 and a record low of 29.40 percent in May 1980.

    All indicators assessing manufacturing growth in the US released in in the previous months have revealed a slowdown in this sector. The manufacturing sector in has suffered in the recent times on account of slowing global growth as well as the strong US dollar which has led to lower demand from overseas. Low oil price has also been an important factor that has checked increase in manufacturing activity.

    U.S. economic growth slowed down sharply in the fourth quarter with economy growing 0.7 per cent hit by rising inventory which resulted in a loss of appetite among manufacturers to restock. This impacted overall factory activity. Strong dollar and weak global economic outlook hurt exporters. The economy grew at a 1.6 per cent pace excluding inventories and trade indicating the huge negative impact of the slowing down of manufacturing sector trade on GDP. Inventory in Q4 was worth $68.6 billion, more than what economists had estimated and subtracted 0.45 percentage point from Q4 GDP growth. The data indicated inventory will continue to be a drag on growth in Q1 of 2016.

    Moreover, lower oil prices can be expected to have hurt profit margins of energy firms that over the last few months have been compelled to reduce their capital spending budget. Oil prices have fallen 70 per cent from their peak in June 2014 and have hit multi year lows in the recent past. This affected investment in the energy sector.

    Research Team at Danske Bank however sees a stabilization of the index in January. Stabilization or slight improvement in data will likely help to diminish a fear of recession.
    For more information, read our latest forex news.

Share This Page

free forex signals