ISM: Better Growth Signal - Input Prices Pressure Profits
Bounce-back in manufacturing in June suggests that modest growth remains the baseline story. Production improved while orders were steady. Employment remains sub-par. Input prices; however, remain very high and will put downward pressure on profits. In contrast, export orders remain solid for machinery companies among others.
Production Up, Orders Steady: Growth Still Positive
- The production index, which originally fell below breakeven in March, picked up in May and remained in positive territory. By industry, there were gains in computers, petroleum, food and chemicals.
- Employment stayed below the 50 breakeven level for the eight straight month, suggesting continued job losses in June.
Export Orders Up Big, But Prices an Issue for Profits
- New export orders came in at 58.5 and continues to be a bright spot for the economy. Export strength has been the major supporter of the manufacturing sector in recent months and has contributed to positive GDP gains the last two quarters.
- Prices paid remain a key worry across the economy. The high level of this index suggests continued profit pressures ahead.
Wachovia Corporation
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