Manufacturing in the mid-West and in Texas expanded in September with two purchasing managers' surveys and one Fed regional poll improving more than forecast, suggesting that a rebound in factory output may help to support the economy into the fourth quarter.
The Milwaukee office of the Institute for Supply Management reported that its manufacturing index rose to 55.0 this month, outstripping the 48.21 score from August and the 50.0 prediction. Important details of the survey of purchasing managers were positive: new orders climbed to 58.76 from 53.59; employment rose to 61.81 from 47.86.
A separate index from a survey of Chicago area purchasing managers also saw a rise in September to its highest level since May, 55.7, from 53.0 in August. The forecast in the Bloomberg survey of economist had been 54.0. Most sub-indices exhibited strength; new orders rose to 58.9 in September, the highest since February, from 57.2; production jumped to 58.0 in September from 53.0 the prior month; employment however, fell to 53.2 from 54.9, a five month low.
Manufacturing comprises about 12 percent of U.S. GDP and has been bolstered recently by purchases of cars, building materials and appliances. Economists monitor factory production for signs as to the direction of the overall economy. Even though manufacturing is a small section of the overall U.S. economic output, its longer lead times and capital use makes it a barometer for the general economy.
Finally, the Dallas Federal Reserve Manufacturing Outlook Index rose to 12.8 in September from 5.0 in August. Economists had predicted a reading of 5.5. It was the best score in 19 months.
Components of the report were mixed: capacity utilization jumped to 10.7 from 4.6; new orders dropped to 5.0 from 5.4; number of employees slid to 10.0 from 11.2. The Dallas Fed region comprises Texas, Northern Louisiana and Southern New Mexico.
Chief Market Strategist