ISM October New Orders Index Up Year Over Year For Second Consecutive Month


ISM New Orders Index Chart- Click to enlarge

Updated 11/1/12 After a weak reading in August, the not seasonally adjusted index rebounded to 53.6 in September and 61.8 in October, which was above the October 2011 reading of 60.9. This suggests that the weakening trend under way since the initial bungee rebound from the recession, has ended.

Meanwhile the October headline seasonally adjusted aggregate Purchasing Managers Index reading of 51.7 handily beat the consensus expectation of 51.

October has virtually always been an up month in the NSA New Orders Index. The average month to month gain over the previous 10 years was +5.1. Last year the October reading was up by 8.5. In that context this year’s gain of 8.2 from the September reading was better than average. It came on the heels of a much better than average gain in September, which is normally a down month.

The manufacturing sector represents about 11% of the economy. The services sector data representing the bulk of the US economy, normally released a few days after the manufacturing data, typically lags the manufacturing index by a month or two although this year it turned up before manufacturing did. The ISM manufacturing new orders index is usually a good leading economic indicator but in terms of its bigger year to year trends, it is not very useful as a stock market indicator.

This index trended lower from 2004 to 2007, while stock prices continued to rise. That was a potential hint that the stock market may have been in a bubble beginning in 2005, since it kept rising while ISM’s new orders were slowing. The new orders index briefly went negative in early 2007, but then recovered until October, which is about when the Fed pulled the plug on the System Open Market Account (see below). The index next went negative in January 2008, by which time the market was down for the count.

For more charts and discussion on this topic visit  the permanent ISM New Orders and Factory Orders page from which this report is excerpted. That page is updated whenever new data becomes available. You can bookmark it for future reference. 

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

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