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The good news - manufacturing in the U.S. expanded in November for a fourth consecutive month.  It appears to be a given that growth is here to stay!


The not so good news - the rate of growth is slowing.  The Institute for Supply Management’s manufacturing index fell to 53.6, lower than forecast 55.0 and from October’s three-year high of 55.7. 

On this news stocks rallied yesterday and are extending gains into early trading today. 

Yes the “Broken buck” is helping to spur demand from abroad, but the overall impact is inflationary.  Look no further than the comments from the field. 

(1)    Apparel, Leather & Allied Products – “Becoming concerned about the value of the U.S. dollar!"

(2)    Food, Beverage & Tobacco Products - "Low value of the dollar driving commodity costs higher."

(3)    Fabricated Metal Products - "Demand from automotive manufacturers remains strong and building."

(4)    Electrical Equipment, Appliances & Components – “Capital construction seems to be picking up, and we are seeing more jobs that are bid out."

(5)    Primary Metals - "Steady increase in business."   The XLB was the best performing sector yesterday and again today!

Maybe it is just a coincidence but the ISM numbers look just like consumer confidence - making lower highs!  For the second day in a row the low beta SAFETY trade (XLU) is outperforming the other higher beta sectors! 

Just another coincidence?

Howard Penney

Managing Director