US: Contraction in ISM index – Nordea

Anders Svendsen, analyst at Nordea Markets, suggests that with the US ISM manufacturing dropped below the magic 50-mark in August is pointing to a manufacturing sector contraction for the first time since early 2016.

Key Quotes

“Four of five subcomponents are below 50. We expect the downward trend to remain intact in coming months.”

“The ISM manufacturing index dropped to 49.1 in August, down from 51.2 in July. Consensus expectations were for an unchanged reading.”

“The drop was somewhat surprising as the regional indicators – Empire and Richmond among others – pointed to a higher reading, and upside surprises to consensus have been the prevalent in Augusts of recent years.”

“New orders from abroad fell to 43.3, which is by far the weakest reading since the financial crisis.”

“Release adds fuel to the dovish fire under the Fed. Buckle up for another rate cut at the next FOMC-meeting (18th of September).”