The ISM mfr’g index in Nov is back below 50 at 49.5, below expectations of 51.4 and down from 51.7 in Oct. It’s the lowest since July 09 and follows the two prior months above 50 which followed the three months before that which were slightly below. New Orders softened by almost 4 pts to 50.3 while Backlogs fell a touch to 41 from 41.5 but that is the lowest since Apr ’09. After the inventory build seen in the Q3 GDP data, mfr’g inventories fell 5 pts to 45, a 5 month low and inventories at the customer level fell 6.5 pts to the lowest since Dec ’11. The Employment component fell 3.7 pts to 48.4, the 1st time below 50 since Sept ’09. Also of note, Export Orders fell 1 pt to 47, remaining below 50 for a 6th straight month. Production, which follows orders, did rise 1.3 pts to 53.7 but will be tough to sustain if New Orders slow further. Prices Paid fell 2.5 pts to 52.5 but remains above the 6 month avg of 49.3. Of the 18 industries surveyed, just 6 reported growth with 11 seeing contraction and 1 seeing no change. The ISM said this, “Comments from the panel this month generally indicate that the 2nd half of the year continues to show a slowdown in demand; respondents also express concern over how and when the fiscal cliff issue will be resolved.” Bottom line, lackluster still defines the state of manufacturing due to the issues well known. However, we know the hurricane had a pronounced impact on the economies of the northeast as seen in the NY and Philly mfr’g regions. Today’s ISM unfortunately can’t break it out to give us a better feel for the rest of the country but we know from other regional survey’s separate from the Northeast that things are just so-so. Also, export orders are just 1/2 pt from the weakest since April. This all said, a deal in the fiscal negotiations, whether good or not, could add clarity that is certainly missing. The S&P 500 above 1400 is definitely betting on it.
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