US: It's business as usual in manufacturing - ING

James Smith, Economist at ING, notes that in one of the first major sentiment readings since Trump was elected, US ISM manufacturing came in a bit higher than consensus, at 53.2 vs. 51.9 in October.

Key Quotes

“This seems to be mainly due to slowing supplier deliveries (higher index), which may be down to hurricanes and other temporary factors. Importantly, the other key sub-components were robust: new orders, employment and prices paid were all stable and at respectable levels. The overall picture looks much better than it did around the turn of the year.”

“It is tempting to view this figure as a gauge of the manufacturing sector’s reaction to Trump’s surprise election victory and his new economic ideas. This may be partly true, but we have to remember that PMIs are generally a measure of current business conditions, rather than longer-term sentiment. Manufacturer’s immediate concern is probably the stronger dollar, rather than an increase in policy uncertainty (at least for now, that is). This doesn’t seem to have been reflected in November's ISM reading (new export orders remained almost unchanged), but it’s certainly one to watch over the next few months, particularly if the dollar stays persistently strong.”

“Even a disastrous figure today wouldn't have been enough to throw the Fed’s December plans off track. The same will probably be true of tomorrow’s jobs report. But both provide clues to the pace of hikes in 2017. We expect the FOMC to increase rates twice next year, but there are many factors consider. See the diagram below for more details, taken from our Payrolls Dashboard.”