Against disappointing China PMIs, US Manufacturing PMI surged back near 2017 highs in October - shrugging off the efects of recent storms, floods, and wildfires - with factory jobs near their best since the financial crisis and gains broadening out to smaller firms too. However, ISM Manufacturing disappointed, falling back from 13 year highs.
So take your pick... is manufacturing momentum picking up (PMI) or fading (ISM)?
Under the hood, ISM reported weaker production, lower prices paid, and weaker new orders and while PMI reported a surge to 28-month highs for employment, ISM saw a drop to 3 month lows.
As a reminder, in September, the ISM's gauge was inflated by a surge in the supplier deliveries index, indicating longer lead times as producers scrambled to get back to normal operations following hurricanes Harvey and Irma. That measure fell in October while remaining well above its average from the first eight months of 2017.
ISM Respondents were generally positive with most comments focused on prices...
"Raw material costs on the rise, but purchasing operation has navigated shortages caused by hurricanes." (Chemical Products)
"Incoming orders are strong, mainly due to recovery efforts in the wake of Hurricanes Harvey and Irma. Backlogs are up due to operating inefficiencies." (Machinery)
"Hurricanes have caused shortages in the resin market, resulting in price increases, inventory constraints and increased lead times." (Computer & Electronic Products)
"Ongoing market growth. Minimal impact expected from hurricanes so far in this season." (Miscellaneous Manufacturing)
"Business seems to be a bit depressed due to the storms last month, but is picking back up." (Fabricated Metal Products)
"Business continues to be better than expected." (Transportation Equipment)
"Business is good. Supplier deliveries have extended. Things are really picking up." (Food, Beverage & Tobacco Products)
"Our plants are sold out for 2017 — we can’t take any new orders." (Nonmetallic Mineral Products)
"In plastics processing, Hurricane Harvey is the reason for every price increase being announced — and virtually all suppliers are announcing price increases." (Plastics & Rubber Products)
However, commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit was relatively exuberant:
“US manufacturing stepped up a gear at the start of the fourth quarter, boding well for higher factory production to support robust economic growth in the closing months of 2017.
“Production volumes jumped higher on the back of a substantial improvement in order book inflows, in part due to supply chains returning to normal after the hurricanes but also reflecting a combination of strong underlying demand.
“Factory jobs growth has also picked up to one of the strongest since the global financial crisis, underscoring the improvement in optimism about future trading among manufacturers.
“An important change in October was the broadening out of the expansion to smaller firms, which have lagged behind the strong growth reported by larger rivals throughout much of the year to date but under-performed to a lesser extent in October.”
Along with this morning's ADP data, it certainly bodes well for Friday's payrolls print...