 | The ISM Manufacturing index increased to 56.3 in August from 55.5 in July |
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Implications: Today's ISM report severely undermines the case for a double-dip. The factory sector blew away consensus expectations in August, accelerating its expansion and growing for the 13th straight month. The ISM's employment index came in at 60.4, the highest since 1983. On the inflation front, the prices paid index rose to 61.5, signaling that inflation, not deflation, is the more likely threat.
In other news this morning, the ADP Employment index, a measure of private sector payrolls, declined 10,000 in August, the first loss in seven months. However, ADP's measure of payrolls typically underestimates the official report from the Labor Department, so we still expect that private payrolls increased in August. Construction declined 1% in July and fell 3.7% including downward revisions to May/June, with most of those revisions in home building. The decline in July was primarily due to street paving, single-family home building, and home improvements. Yesterday, the Case-Shiller index, a measure of home prices in the 20 largest metro areas around the country, showed an increase of 0.3% in June and is up 4.2% in the past year. The end of the homebuyer tax credit may lead to some temporary price weakness over the next few months, but we expect home values to be higher at the end of the year than at the end of 2009, confirming an underlying upward trend.
Click here to view the entire report.
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