ISM manufacturing charges on (Nov. 2, 2020)
The ISM Manufacturing Index shot up 3.9 points in October to 59.3, its highest level since September 2018, and above the consensus of 56.0, as factory activity gained significant momentum. It was the biggest increase since May 2009, excluding the post-lockdown surge in June. Of the 18 ISM industries, 15 expanded, matching the highest number since March 2019, and indicating broad-based growth. The report also noted that five of the six largest industries posted strong growth. The ISM index is bullish for manufacturing output and broad economic growth.
Construction spending disappoints (Nov. 2, 2020)
Construction spending ticked up 0.3% in September, the least in four months, and below the consensus of 1.0%. Private sector spending rose 0.9%, led by residential investment which posted another strong month, up 2.8%. But private nonresidential construction spending, which accounts for about 1/5 of capex, fell a broad-based 1.5%. Public construction dropped 1.7%, led by cuts in highway and street, public safety, and conservation and development spending. On a y/y basis, total construction spending eased to 1.5%, as the public sector spending shrank 1.3%, the most since June 2017. Nonresidential construction spending sank 6.0% y/y, the second most since May 2011.
Bankruptcy fillings still low (Nov. 2, 2020)
Total U.S. bankruptcy filing ticked up only 1.4% in Q3 to 126,243, the third lowest level on record. There was a slight increase in business filings, up 7.1% to 5,521, but that was also close to historic lows. As we discussed in the 10/20/2020 U.S. Focus, the low level of bankruptcy fillings is partly due to the large monetary and fiscal stimulus, which extended a lifeline to both households and businesses struggling with the fallout from the pandemic. But with fiscal stimulus waning and bank lending standards tightening significantly, we could see a rise in bankruptcy filings late this year and into 2021.
Factory orders increase (Nov. 3, 2020)
Factory orders increased 1.1% in September, up for the fifth consecutive month, and slightly above the consensus of 1.0%. Nondurable goods orders ticked up 0.3%, while durable goods orders rose 1.9%, unchanged from the advance estimate. The increase in durables was led by transportation equipment, as civilian aircraft orders turned positive again. Nondefense capital goods orders ex-aircraft, a proxy for capex, rose 1.0%, also its fifth consecutive gain, although the smallest in that sequence.
On a y/y trend basis, factory orders declined 5.1%, led by a steeper slide in nondurables. However, the negative momentum has diminished in the past several months, in tandem with the improvement in the ISM Manufacturing Index, signaling a strengthening of factory activity.
Shipments rose 0.3%, while inventories were unchanged. As a result, the I/S ratio edged down to 1.42 from 1.43, inching closer to its pre-recession level of 1.40.US Crude Inventories Fall the Most in 2 Months (Nov. 4, 2020)
US crude oil inventories fell by 7.998 million barrels in the week ended October 30th 2020, following a 4.32 million rise in the previous period and compared to market expectations of a 0.89 million increase, according to the EIA Petroleum Status Report. That was the steepest decline in crude stocks since the week ended August 28th. Meantime, gasoline inventories were up by 1.541 million barrels, while markets had forecast a drop of 0.871 million.