US ISM manufacturing ends 2016 on a high note - Natixis

Thomas Julien, Research Analyst at Natixis, notes that the US ISM manufacturing index surprised on the upside in December (+1.5pts to 54.7) and the increase was broad based but the biggest drivers were the production and the new orders (a leading indicator) components.

Key Quotes 

“The employment component also increased slightly. All in all, today’s ISM is consistent with a slight pick-up in the manufacturing activity in the short run.”

“ISM manufacturing increased from 53.2 to 54.7 in December, above expectations (consensus 53.8) but closer to ours (Natixis: 55.0). The increase was broad based but the biggest drivers were the production and new orders components. The employment component also improved slightly.”

“ISM prices paid index (not included in the overall ISM index) soared in December (+11pts to 65.5) in line with the recent increase in oil prices.”

“In short, today’s report surprised on the upside but remains consistent with regional surveys. All in all, manufacturing surveys signal a slight uptick of activity in the sector in the short run with a solid increase in new orders. Yet, as global growth prospects remain modest and the dollar is strengthening we should not expect a strong momentum in the medium run.”

“As for our job forecast, the ISM employment component improved slightly but is still consistent with our NFP forecast for December (+150K).”