US ISM manufacturing index climbed to 53.2 in June, much better than expected, after edging up 0.5 points to 51.3 in May. This is the highest since February 2015. The improvement since March, when the index bounced above the 50.0 expansion/contraction line broke a string of five straight months (from October to February) below that level. The employment component improved back into expansionary territory (albeit barely) at 50.4 from 49.2; it had been below 50.0 since November. New orders rose to 57.0 from 55.7. New export orders edged up to 53.5 from 52.5. Prices paid slipped to 60.5 from 63.5. Data support our view that the economy has picked up the pace since the soggy Q1 performance.
The U.S. ISM bounce to a 16-month high of 53.2, from 51.3 in May and 50.8 in April, left a four-month stretch above the 50-mark and a big five-month climb from the 48.0 expansion-low in December. The ISM still sits below the 59.9 cycle-high in February of 2011, as all the sentiment measures have fallen sharply since the oil price plunge starting in Q3 of 2014. The net sentiment upturn since February despite some setbacks from March likely reflects a diminishing oil and inventory headwind alongside a reduced net export drag with the sluggish world economy, and the May drop but June bounce for sentiment likely reflects a similar pattern in vehicle assemblies. We still expect a bounce in U.S. GDP growth after an ugly Q1. Today’s ISM bounce follows a Chicago PMI surge to a 56.8 seventeen-month high from 49.3, a Richmond Fed drop to -7.0 from -1.0, a Dallas Fed rise to -18.3 from -20.8, a Philly Fed rise to 4.7 from -1.8, and an Empire State surge to 6.01 from -9.02. We expect an ISM-NMI rise to 53.5 from 52.9. The mix should allow the ISM-adjusted average of the major surveys to rise to 50 from 49 in May, as also seen in January and February, versus 51 in April and a 53 eight-month high in March.
EURUSD currently trading at 1.1130 having touched 1.1165 earlier today for a weekly high.
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