Why This Morning's ISM Was Even More Bullish Than The Headline Number

Good observations on this morning’s strong ISM from Mike O’Rourke of BTIG:

The  ISM  Manufacturing  Report  for  October  registered  an  impressive  reading  beating  the 
expectations of 54.  Not only did the number beat, but the underlying improvements were 
important.  In the September report, the much watched relationship between New Orders and 
Inventories (New Orders‐Inventories) inverted to a negative reading for the first time since 
February of last year.  At the time, Norbert Ore, who runs the survey for ISM, noted that 
anecdotal  conversations  with  respondents  ran  counter  to  the  elevated  survey  reading  for 
inventories.  In the October survey, the relationship righted itself from a ‐4.5 last month to a 
positive 5 this month (Chart 1).  In addition, Customer Inventories still remain relatively lean 
(Chart 2).  The pick‐up in New Orders as a leading indicator should carry some momentum 
through the report for the balance of Q4 2010.  Ore described the situation by noting that he is 
“pretty optimistic we can finish out the quarter with continued strength.”  Additionally, 14 of 18 
manufacturing industries reported growth for the month.  The report is a positive surprise in the 
right direction.  Investors will be watching to see if the balance of the data this week will follow 


As ISM marks our first hard look at Q4 GDP this is obviously pretty positive, and helps begin to take the double-dip fears off of the table, at least for now.

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