The US ISM manufacturing index rose to 53.2 for November from 51.9 in October. This was the strongest reading for five months and above expectations of a more modest increase to 52.1.
Of the 18 manufacturing industries, 11 reported growth for November.
New orders increased to 53.0 from 52.1 with production rising to 56.0 from 54.6 previously.
Supplier deliveries also slowed, which suggests increased capacity constraints, and a further decline in inventories will maintain pressure for increased production levels, especially with the customer inventories reading also below 50.0. The order backlogs index did rise for the month, but remained below the 50.0 reading, which will be of some concern.
The employment component declined to 52.3 from 52.9, but still suggests that employment is increasing with little insight into Friday’s employment data.
The prices index was unchanged at 54.5, while the exports index edged lower to 52.0 from 52.5. The data suggests a strong dollar is having only a limited impact at this stage, but is a restraining influence on both prices and overseas orders.
The rhetoric from manufacturers was generally positive with confidence in the growth prospects for 2017.
Manufacturing should maintain a firm tone in the short term and there are no major policy implications at this stage. The data will certainly not discourage a December rate hike, but there will be no increase in expectations surrounding a faster pace of tightening next year.
The dollar was unable to extend gains given that there had already been a strong tone into the release as EUR/USD found support just below 1.0600. Treasuries remained firmly on the defensive, but resisted further losses.