ISM’s Disappointing Report Could Force Ben Bernanke’s Hand

ISM’s Disappointing Report Could Force Ben Bernanke’s Hand

ISM's Disappointing Report Could Force Ben Bernanke's Hand

The Institute of Supply Management (ISM) reported today that U.S. manufacturing activity contracted for the third consecutive month, as judged from its PMI index which read 49.6 for August. This compared unfavorably with the ISM index for July which was 49.8. It was also the lowest reading recorded in three years.

The ISM New Orders Index registered 47.1 percent, a fall of 0.9 percent from the July reading. This metric also fell for the third month on the trot. The Production Index printed 47.2 percent, which also decreased over July by 4.1 percent, and was down for the first time after May 2009. Employment and Prices indices were, however, in positive territory.

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U.S. factory output was pressured by a host of factors, such as the European recession, slowdown in Asia, declining business orders, and weak consumer spending. Another factor is the anticipated fiscal cliff in January. Ben Bernanke has warned about the upcoming fiscal cliff, as has the Congressional Budget Office (CBO).

The ISM declining manufacturing activity could strengthen the hands of Ben Bernanke’s Fed for implementing another round of QE, when it meets on September 12-13.

According to the ISM, industry-wise break-up of 18 manufacturing groups showed growth in these industries:

Printing & Related Support Activities; Primary Metals; Food, Beverage, & Tobacco Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Paper Products; Chemical Products; and Miscellaneous Manufacturing.

The following industries contracted:

Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; and Machinery.

In useful insight, the report also highlights commodities that have shown a rising trend in price:

Caustic Soda; Corn; Corn Products; Corrugated Boxes; Freight Rates; Fuel; Lead Batteries; Natural Gas; Plastic Components; Steel — Carbon Sheet; and Steel — Hot Rolled.

The following commodities were reported to have a falling trend in price:

Aluminum; Copper; Nickel; PET; Polypropylene Resin; Stainless Steel; Steel; and Steel — Cold Rolled.


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