ISM mfr’g fell to 52.6 from 52.9 in Aug and was below expectations of a gain to 54. It is however above 50 for a 2nd straight month but there was a cooling in New Orders which had jumped in the prior two months. They fell about 4 pts to 60.8 but remain well above the low of 23.1 in Dec ’08. Backlogs rose 1 pt, up for a 3rd month. Employment was little changed. Export Orders fell .5 point but remains near the highest since Aug ’08. Prices Paid fell 1.5 pts after Aug’s 10 pt rise. Inventories, the key component that will help drive Q3 growth, rose almost 8 pts to 42.5, the highest since Oct ’08. 13 of 18 industries reported growth, up from 11 in Aug. Bottom line, the guts of the data show that rebuilding inventories and a bounce in export orders have been the main driver of improvement. The ISM also follows a trend over the past week of #’s missing growing expectations implying that up, up and away may just be up for now.
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