US: Signs of ISM manufacturing bottoming - Commerzbank

Research Team at Commerzbank, suggests that there are tentative signs of ISM manufacturing bottoming but a strong Q4 is a hurdle for US Q1 growth.

Key Quotes

“Reviewing developments since the beginning of the year, one thing springs to mind: the situation in US manufacturing seems to be improving. For three months in a row, the ISM manufacturing has been rising, with the March reading of 51.8 the highest since July 2015.

The ISM nonmanufacturing appears to have stopped its downward trend as well, rising to 54.5. Without doubt this development is welcome. We had argued that elevated financial stress rather than the prospect of a significant slowdown in the US economy was the reason for the weakness in the ISM indices.

Another robust labour market report and solid consumer confidence underpin this nicely. The latter is also visible in strong personal consumption, which resulted in an upward revision to US Q4 2015 growth, by 0.4pp to 1.4% (q/q annualised). However, February capital goods orders declining m/m and downward revisions to personal spending point at a weaker Q1.

Our surprise indicator for US activity has recently started to deteriorate again, and the Atlanta Fed’s GDP tracker envisages only 0.4% Q1 growth (q/q, annualised). There is no spring fever (yet), but the US economy should remain on track for 2% growth in 2016, according to our economists.”