November 2018 Institute for Supply Management
Submitted by Atlas Indicators Investment Advisors on December 6th, 2018
Economic output continued climbing in November according to data from the Institute for Supply Management. In fact, both sides of the economy appear to have accelerated in the period as each of their indices improved. Generally speaking, readings above 50.0 suggest growth, so month-over-month upticks in these indicators point to acceleration. On the manufacturing side of the economy, the reading moved to 59.3 from 57.7, and the nonmanufacturing tally rose to 60.7 from 60.3.
Manufacturing coincident and forward-looking components improved. Production (a proxy for output) rose 60.6 from 59.9, boding well for fourth-quarter gross domestic product. Employment gained as well and should support further output as more Americans are earning wages. New orders were the most impressive part of this iteration, growing 4.7 percentage points to 62.1.
America’s service sector looks strong according to the nonmanufacturing index, and this is the largest segment of the U.S. economy. Business activity (also a proxy for output) led this segment, rising 2.7 percentage points to 65.2. The forward-looking new orders rose 1.0 percentage point, boding well for future months and quarters.
Like a month earlier, tariffs were on the minds of many purchasing managers in November. Several mentioned concerns regarding the trade skirmish. Worries range from being able to complete capital investment projects to advancing orders ahead of the year-end tariff deadline (thus potentially pulling demand forward from subsequent quarters), and even anxiousness regarding price competitiveness due to rising input costs.
For now, the economy appears to be moving along nicely despite the purchasing managers concerns. This iteration of ISM is very positive. If it were the only indicator Atlas watches, deceleration would not be in our vocabulary as it looks much better than other data points we follow. We’ll continue monitoring these and other releases to better understand if the American economy has truly reached an inflection point and is slowing. Stay tuned.
