US: ISM Manufacturing signals for continued strength - Wells Fargo

According to analysts from Wells Fargo, the ISM index signaled continued gains in the manufacturing sector. They point out that production, new orders, and employment registered expansion while input cost pressures appear to have increased. 

Key Quotes: 

“The ISM manufacturing index moderated to 56.3 in July from 57.8 in June and thereby remains in expansion mode. This is a positive sign for industrial production and was the eleventh consecutive month in which the index has been above breakeven. Our outlook is for about 2.5 percent growth for industrial production in the second half of this year.”

“Forward-looking indicators also were strong, suggesting that manufacturing production should continue to expand in coming months. New orders remained at a high level at 60.4 and have been in growth mode for 11 straight months. Fourteen of 18 industries showed growth in orders, including plastics, electrical equipment, appliances and chemicals. The gains in new orders are solid and very broad-based.”

“The rise in the ISM prices index does intimate upward pressure on core finished goods in the PPI index. Our outlook is for rising inflation that will prompt the FOMC to start to shrink its balance sheet in the fall and raise the federal funds rate as early as December."