US: Manufacturing activity remains robust – Nomura

The US ISM manufacturing index improved to 60.8 in February, the highest reading since the mid-2000s and above expectations (Nomura: 58.5, Consensus: 58.7), notes the research team at Nomura.

Key Quotes

“The continued improvement in the ISM manufacturing top-line index indicated that momentum in the manufacturing sector will likely continue over the near term and is consistent with other regional surveys.”

“The underlying details were strong, although somewhat mixed. The new orders and production indexes both fell slightly by 1.2pp and 2.5pp, respectively, while still remaining well within growth territory. However, the backlog of orders and supplier deliveries indexes both increased decently by 3.6pp and 2.0pp, respectively, consistent with producers grappling with increased demand.”

“The employment index increased strongly 5.5pp to 59.7, indicating that manufacturing employment in February likely continued to expand at a healthy pace. The index may have been temporarily weakened in January as a colder-than-usual weather hit early in the month.”

“The prices paid index increased 1.5pp to 74.2 in February, pointing to notable upstream price pressure, possibly reflecting the weakening dollar. Electrical equipment, appliances & components firms noted that “the weakening U.S. dollar in relationship to the yuan is starting to impact importing cost. We are starting to see more supplier price increases.”

“New export order growth picked up in February as synchronized global growth continues to bolster manufacturing activity in the US. Looking at the comments from respondents, most highlighted characteristics of the strong economy including a tight labor market, steady orders and some increases in capital expenditures. Continued strength in the manufacturing sector fits well with our optimistic growth outlook for 2018 as a whole.”