Implications: A poor report on manufacturing today as super storm Sandy looks to have hurt manufacturing sentiment. After increasing for the past two months, the ISM manufacturing index dropped, coming in at 49.5 for November, the lowest level since July 2009. This is the fourth time in the last six months that the manufacturing index has been below 50. According to the Institute for Supply Management, a level of 49.5 is consistent with real GDP growth of 2.3%. More likely, today's data are consistent with what will be roughly 0.5% real GDP growth in Q4. We do expect manufacturing to rebound over the coming months as policy uncertainty and the affects of Sandy subside. The best news in today's ISM report was that the new orders index, although falling to 50.3, showed expansion for the third straight month. On the inflation front, the prices paid index declined to 52.5 in November from 55.0 in October. We expect prices, and inflation, to continue to gradually move higher. In other, and better, news this morning, despite Sandy, construction increased 1.4% in October (+2.4% including upward revisions for August/September). The gain in October was led by single-family homes and the federal government. Home building is up 21% from a year ago, with new homes up 32% and improvements to existing homes up 9%. Revisions to construction data for August and September probably push third quarter real GDP growth to 2.8% annualized versus last week's estimate of 2.7%.
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Posted on Monday, December 3, 2012 @ 1:42 PM
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