The ISM indices signal a broad-based upturn in US economic activity and are consistent with our forecast of GDP growth of 2.5% in the third quarter. Figures released at the beginning of October revealed that the US ISM Manufacturing index rose to 51.5 in September from 49.4 in August, above consensus expectations (50.4). The ISM Non-Manufacturing ISM index posted its largest month over month increase on record, rising to a solid 57.1 in September from 51.4 in August.Forward-looking components of the Manufacturing index (production and employment) suggested that momentum was picking up, while the surge in the Nonmanufacturing index in September was the largest one-month increase since data were first compiled, more than compensating for the previous months of decline. Every major sub-indices of the report registered improvement in September, suggesting that the slowdown in services activity was short lived.Other data released in the first days of October have been more mixed. Construction spending fell in August, and spending for earlier months was revised downwards. But factory orders rose in August, while trade data suggested that net external trade is on track to make a large contribution to Q3 GDP growth.Taken together, recent data remain broadly consistent with our US GDP growth forecasts of 2.5% q-o-q annualised in Q3, and 1.5% in 2016 as a whole.
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Frederik Ducrozet and Nadia Gharbi considers the following as important: Macroview, US economic activity, US ISM, US manufacturing data, US non-manufacturing
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The ISM indices signal a broad-based upturn in US economic activity and are consistent with our forecast of GDP growth of 2.5% in the third quarter.
Figures released at the beginning of October revealed that the US ISM Manufacturing index rose to 51.5 in September from 49.4 in August, above consensus expectations (50.4). The ISM Non-Manufacturing ISM index posted its largest month over month increase on record, rising to a solid 57.1 in September from 51.4 in August.
Forward-looking components of the Manufacturing index (production and employment) suggested that momentum was picking up, while the surge in the Nonmanufacturing index in September was the largest one-month increase since data were first compiled, more than compensating for the previous months of decline. Every major sub-indices of the report registered improvement in September, suggesting that the slowdown in services activity was short lived.
Other data released in the first days of October have been more mixed. Construction spending fell in August, and spending for earlier months was revised downwards. But factory orders rose in August, while trade data suggested that net external trade is on track to make a large contribution to Q3 GDP growth.
Taken together, recent data remain broadly consistent with our US GDP growth forecasts of 2.5% q-o-q annualised in Q3, and 1.5% in 2016 as a whole.
All in all, it is too early for the Fed to reassess its macro outlook ahead of another important job report on Friday and the release of other first-tier data in the next few weeks, not to mention the presidential election. At this stage, we maintain our call that the Fed will hike base rates by 25 basis points in December.