ISM manufacturing index Aug 2022
- Prior was 52.8
- Prices paid 52.5 vs 55.5 expected (prior 60.0)
- Production 50.4 vs 53.5 prior
- Employment 54.2 vs 49.9 prior
- New orders 51.3 vs 48.0 prior
This is a big surprise. Lots of good news here. The market is largely ignoring the dip in prices and focusing on the strong headline and that's lifted the US dollar to new highs on the day. USD/JPY is flirting with 140.00.
Comments in the report:
- “Demand from customers is still strong, but much of that is because there is still fear of not getting product due to constraints. They are stocking up. There will be a reckoning in the market when the music stops, and everyone’s inventories are bloated.” [Computer & Electronic Products]
- “Sales in target business softening month-over-month, down 12 percent by revenue. Inventory days are increasing.” [Chemical Products]
- “Strong sales continue. The impact of the chip shortage is slowing, and the decreasing COVID-19 resurgence in Asia is now affecting production more than chips.” [Transportation Equipment]
- “Supply in most groups is slowly increasing, but demand appears to be outpacing — causing pricing to either stabilize or increase.” [Petroleum & Coal Products]
- “Inventories are far too high, and we are on pins and needles to see how quickly and at what magnitude our busy season begins. We will start seeing that in the next few weeks.” [Food, Beverage & Tobacco Products]
- “Continue to struggle with electronic component shortages. Several smaller machine shops are (manufacturing) the pacing item for our production due to lack of direct labor machinists.” [Machinery]
- “Overall, I have seen much improvement in the availability of raw materials. However, trucking issues continued, and production capacity within some industries remains tight. I have growing concerns that as cement and mineral companies run ‘all out’ to meet demand, we will see more downtime due to maintenance (issues).” [Nonmetallic Mineral Products]
- “Demand is softening; however, we are continuing to produce to replenish inventory.” [Primary Metals]
- “Orders are still strong through the end of the year, but there is a feeling that customers may start pulling back on orders, either cancelling them or pushing them into 2023.” [Plastics & Rubber Products]
- “Business conditions are good, and demand is strong. Securing enough raw material supply to keep up is still a challenge.” [Miscellaneous Manufacturing]
There isn't much to fret about in those comments and the thinking is that it's a green light for the Fed to tighten more aggressively. What really stands out though is how much better the US economy is doing than elsewhere. That's the flashing signal for USD.