The Institute for Supply Management (ISM), Purchasing Managers’ Index (PMI) for the United States was released today for the month of December 2009.
The result was 55.9, beating expectations of 54.1 and the previous report of 53.6. The index reading above 50.0 represents growth in manufacturing.
Click here for the official report
“The manufacturing sector grew for the fifth consecutive month in December as the PMI rose to 55.9 percent, its highest reading since April 2006 when it registered 56 percent. This month’s report is quite strong as both the New Orders and Production Indexes are above 60 percent. The sector may be benefiting from an excessive destocking cycle as indicated by the recent performance of the Customers’ Inventories Index. Customers’ inventories have been ‘too low’ for nine consecutive months, and this month’s index is the lowest reading since the inception of the index in January 1997. Overall, the recovery in manufacturing is continuing, but there are still some industries mired in the downturn as evidenced by the seven industries still in decline.”
The news has led to risk appetite in the markets. The US stock market and commodities such as gold and oil are up significantly. In Forex, the US dollar is down significantly, and the major commodity related currencies, the Australian dollar and Canadian dollar, are up significantly. Remember, good US news often results in a weaker US dollar.
Confidence in a recovering manufacturing sector, as evidenced by this report and last week’s Chicago PMI, is likely to remain starting off the new year. Look for gains in stocks, commodities and related currencies (AUD and CAD), and a decline in the US dollar. This week is a fairly heavy news week for the US with housing and employment data coming out, which could further cement the confidence or rock it. Many traders believe as January goes, so goes the year. Therefore confidence and market moves early in the year are significant. However, it’s not a proven formula, so stay adaptive to the markets and sentiment.
