US ISM Manufacturing: Factory sector rides out recent storms - Wells Fargo

Analysts from Wells Fargo, point out that manufacturing activity picked up in September with the ISM index notching its highest reading this cycle. They noted that some of the gains can be traced to the effects of recent storms, but details suggest more fundamental strength.

Key Quotes: 

“The ISM manufacturing index backed up a solid report in August with another standout reading in September. The composite index rose to a cycle high of 60.8. The gain in part looks to reflect some of the fallout of Hurricanes Harvey and Irma, but the breadth of strength suggests factory activity remains solid.”

“Among the composite’s sub-indices, supplier deliveries posted the largest gain, jumping 7.3 points to 64.4. Disruptions from the Gulf area storms have caused delivery times to lengthen. The bottle necks have extended beyond the chemicals industry, with respondents from the paper products and food, beverage & tobacco industries also reporting storm-related supply issues.”

“One area where hurricane effects were clear was in prices. The prices paid index jumped to 71.5 in September with multiple respondents specifically citing higher input costs due to the recent storms.”

“The ISM employment index points to continued strength for September. The hiring index edged up from an already elevated reading to 60.3. The solid pace of hiring in recent months suggests that longer supplier delivery times are not solely due to temporary weather disruptions. We look for the factory sector to add to payroll growth in Friday’s employment report, but note that hiring disruptions due to the recent hurricanes generate the potential for readings that may not be indicative of the underlying trend in factory hiring.”