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Mixed US Manufacturing Data

James Boston
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The US’s Institute of Supply Management has just published the market moving ISM Purchasing Managers Index (PMI) for the manufacturing sector for the month of October. This index now stands at 59.0 in comparison to a reading of 56.6 in the month of September, market consensus estimates had priced in just a slight rise to 56.7 in these figures. In the run up to the publication of the ISM Manufacturing PMI, Markit Economics released it’s final version of the same indicator for the month of October. The Markit Economics PMI was announced at 55.9 compared to 57.5 in September and a consensus estimate for a fall to 56.2 in today’s readings, this consensus was based on the late September preliminary release of this statistic.

Industry in the US is stable and growing in it’s own right but is set to receive significant additional support from the falling input costs for natural gas. The US has a technology advantage in natural gas extraction and recent developments have meant that it is possible for US industry to benefit from natural gas prices that are 40% of those in Europe and just under a quarter of the cost being paid by Asian manufacturers. The difficulty in transporting gas across continents means that this price differential is likely to hold until such a time as other countries sufficiently reduce their cost of extraction, this however requires major investment and therefore the cost differences are likely to persist for some time.

As a result of the lower production costs, the US has developed for itself a sustainable competitive advantage in production within energy intensive industries such as steel making and oil refining. According to a recent report by the International Monetary Fund (IMF) the US is benefiting to the extent of 6% increase in manufactured product exports worldwide.

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