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January 3, 2017 By Peter Boockvar

December ISM Jumps Further

The December ISM manufacturing index improved further in the post election optimism. It rose to 54.7 from 53.2 in November and vs 51.9 in October. This is the best level in two years led by a 7.2 pt jump in new orders to above 60. Backlogs though were unchanged at a still below 50 read of 49. Notwithstanding the US dollar jump, export orders improved by 4 pts to 56. Employment was up slightly to 53.1 from 52.3 but that is still the highest level since June 2015. Inventories at both the manufacturing and customer levels remained below 50 which leaves room for building if end demand is actually realized vs right now what is hoped for. The growth optimism also came with rising inflation expectations as prices paid jumped by 11 pts to 65.5, a level last seen in 2011. Of the 18 industries asked, 14 saw rising price pressures, double the level seen in November.

Even though there was a further improvement in the headline two year high print, there was still just 11 of the 18 industries surveyed that saw growth, the same level as in November. Also, six reported a contraction and unchanged with November. With respect to the jump in new orders, 12 industries reported growth vs 9 last month.

Bottom line, today’s figure adds to the positive gains in sentiment indicators post election measuring the direction of change, not the degree. Now we need to see in coming months to what degree this optimism translates into actual performance as 1/3 of industries are still seeing declining orders. The Trump honeymoon is about to end and the details of what will get done and won’t will be revealed with respect to tax and regulatory policy, the areas that so many are so excited about. US Treasury yields are back to the highs of the morning, as is the US dollar, in response to the positive upside and the spike in prices paid. The sustainability of the dollar strength will of course influence the state of export orders and whether the rise in December can last.

 

Filed Under: Latest Data

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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