MNI INTERVIEW: US Factory ISM Surges But Faces 2nd Wave Risk

The U.S. factory recovery is poised for growth through year-end but remains jeopardized by rising coronavirus cases and the failure of Congress to deliver fiscal relief, Institute for Supply Management chair Tim Fiore told MNI Monday.

The ISM factory index gained 3.9 points to 59.3 last month for the second-biggest gain since 2009, but "things seem to be changing quickly again as it was back in March and April," Fiore said. The index reached the highest since September 2018 and beat the Bloomberg consensus of 56.

The survey likely overstates confidence that sagged as the coronavirus case load built up, he said. "Sentiment is probably not as positive from a virus standpoint as it was maybe mid-month. That has been degrading."

"We are kind of on a see-saw ride here," Fiore said, though headline PMI numbers will likely remain above 50 in the months ahead and indicate growth.

There are increased risks in November coming from politics, shutdowns in Europe, rising cases in the U.S. and delayed fiscal support, Fiore said. "We are going to have much clearer sailing in December and January," he said.

NEW ORDERS

Many of the survey's details firmed between September and October, as new orders rose to 67.9 from 60.2, the highest since 2004. As customer inventories ran down to a decade low of 36.7, Fiore said this suggests healthy gains for orders and output in coming months.

This in turn should be good news for employment growth, Fiore said, as the employment component for October rose to its highest level since June 2019 to 53.2 from 49.6 in September. "It appears to be demand driven," he said, and "there are not as many comments about absenteeism."

"They are hiring for current and future demand," Fiore said.

The prices index also hit the highest since October 2018 at 65.5, an increase of 2.7 compared with the September reading of 62.8.