ISM manufacturing index hits more than 2-year high

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By Steve Goldstein, MarketWatch

Bloomberg

A 2014 Chevrolet Corvette Stingray sits on the production line at the General Motors Co. Bowling Green Assembly Plant in Bowling Green, Ken.

WASHINGTON (MarketWatch) — Manufacturing conditions improved in November to their best level in more than two years, according to a closely followed survey released Monday.

The Institute for Supply Management’s manufacturing index climbed to 57.3% from 56.4% in October, reaching the highest level since April 2011.

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The reading topped the 55% expected in a MarketWatch-compiled economist poll. Readings in the so-called diffusion index above 50% indicate expansion.
The upbeat data seemed to move bond prices, as the 10-year note /quotes/zigman/4868283/delayed 10_YEAR +2.26% rose to 2.79%. Yields move in the opposite direction to prices. Stocks /quotes/zigman/3870025/realtime SPX +0.14% were in negative territory.Read more on bond prices.
“We think these data take the FOMC one large step closer to announcing a tapering in the pace of bond purchases at the December meeting although a final call on this will have to await the November jobs report on Friday,” said analysts at RDQ Economics in a note to clients.
The Federal Reserve has been buying $85 billion per month of Treasury- and mortgage-backed securities, and the market has been hotly debating when the central bank will begin to curtail the program.
The subcomponents of the ISM report were strong, as new-orders index increased in November by 3 percentage points to 63.6%, and the production index increased by 2 percentage points to 62.8%.

“Outlook for the remainder of the year and into 2014 is trending positive,” said one purchasing manager in the chemical products industry.
“Getting much busier toward the end of the year,” added a manager in furniture and related products.
A similar poll of U.S. manufacturing conducted by Markit, saw a 10-month high of 54.7%.
Similar surveys taken across the globe saw generally stronger conditions, with multiyear highs in Germany, Japan and the U.K. Even hard-hit Greece saw reason for optimism, with its first rise in output in more than four years. Click on external link to Markit's global PMI readings.
The J.P.. Morgan global manufacturing PMI rose to 53.2 in November from 52.1 in October to reach the best level since May 2011.
These surveys tend to have a strong correlation with actual output, and their timeliness make them a closely scrutinized indicator. But in recent months, they have run a bit hotter than actual production would suggest.
In October, manufacturing production grew 0.3% on the month and rose 3.3% from the same period of 2012, according to separate data from the Federal Reserve.
So-called core capital goods orders fell 1.2% on the month and rose 3.6% from the same period of 2012, according to Commerce Department data.

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