James Knightley, analyst at ING explained that the October reading of the ISM
non-manufacturing report looks very strong. The composite activity index has
risen to 59.1 from 56.9 (consensus was 56.5).
Key
Quotes:
"It has only been higher twice in the past seventeen
years (July this year and August 2005), so suggests that things are looking
really very strong.
The details show that both new orders and business
activity are roaring ahead (62.0 and 63.0 respectively relative to a breakeven
level of 50) while employment improved again to an incredibly strong 59.2
reading. With the ADP report posting a 182k gain today and jobless claims
continuing to slide, this should more than offset the concern from the ISM
manufacturing employment index dipping into contraction territory on Monday.
There was even good news from the export orders component, which rose to 54.5
from 52.5, leaving it well above the 6month rolling average.
It does
therefore appear that while the manufacturing sector remains under pressure from
dollar strength and external demand weakness, the rest of the US economy is
looking in good shape. If this is backed up by a respectable payrolls report
(and hopefully a rise in average earnings)on Friday it will look increasingly
likely that the Federal Reserve will come down in favour of hiking in December."
