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.
Follow my comments on the markets and economy in real time @Lee_Adler on Twitter!
Stay up to date with the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, along with regular updates of the US housing market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Try it risk free for 30 days. Don’t miss another day. Get the research and analysis you need to understand these critical forces. Be prepared. Stay ahead of the herd. Click this link and begin your risk free trial NOW!
Join the conversation and have a little fun at Capitalstool.com. If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.
