The ISM manufacturing survey results for November show a moderation in the pace of activity. The level of the composite index during November (56.6) suggests that the manufacturing is growing but at a slightly slower pace compared with October (56.9). Indexes tracking new orders (56.6 vs. 58.9 in October) and production (55.0 vs. 62.7 in October) declined but are holding above 50.0. Indexes measuring employment and exports dropped, while the import orders index moved up during November. The national index points to a mild slowing in factory conditions, while the November regional surveys of Philadelphia, Chicago, and New York sent a more bullish message.
Overseas, the Purchasing Managers' Index (PMI) of China rose to 55.2 in November from 54.7 in October; the November reading is the highest since April 2010. The HSBC index for manufacturing in India advanced to 58.4 from 57.2 in October. Reportedly the JPMorgan Global PMI rose to 53.9 during November from 53.7 in October. The main inference is that the global factory sector is humming along.
Strength in Residential Construction Spending is Entirely from Improvements
Residential construction outlays increased 2.5% in October after a 0.6% gain in September. The headline number is impressive and the increase in residential construction outlays should add to GDP growth in the fourth quarter. However, it should be noted that the entire gain of these outlays in October was from home improvements and not from new residential construction (see Chart 3). The level of residential construction outlays for new homes has failed to make a noticeable movement since the early part of 2009 (see Chart 2). Non-residential construction spending fell 0.7% in October after a 0.2% increase in the prior month and public sector spending on buildings moved up 0.4%.
Auto Sales Held Steady in November
Sales of autos held steady in November at an annual rate of 12.26, which supports expectations of growth in consumer spending in the fourth quarter, close to the 2.8% increase seen in the third quarter.
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