Source: Economics Group of Wells Fargo Bank, N.A.
Summary
A better-than-expected print for the ISM index still leaves manufacturing stuck in a rut, even if orders did crest above 50 for the first time since March. We revisit the ups and downs of Trump’s first term to get a sense of the potential impact of coming tariffs.
A Five-Month High is Still Rather Low
The 48.4 print for the November ISM marks the highest reading since June but is still below the breakeven line of 50. In an era in which firms are prioritizing spending on intellectual property assets rather than equipment and physical products, manufacturing continues to struggle.
Of the five sub-components that feed into the headline, only new orders was in expansion territory in November coming in at 50.4 (chart). While this is only just above 50, it marks a jump of a little more than three points from the prior month. An improved outlook for bookings follows onto last week’s durable goods report which showed orders for non-defense capital goods, ex-aircraft, a proxy for future capex spending, fell 0.2% in October. Not only was that a disappointing outturn in light of the modest gain that had been expected, but also the decline came despite the fact that September’s gain of 0.7% was pared to a more modest 0.3% increase.