A more reliable measure of the national trend in manufacturing is due on Monday (Nov. 23), when Markit Economics publishes the flash estimate for its purchasing managers’ index (PMI) in November. Previously, this benchmark rebounded to a six-month high in October, suggesting that this corner of the economy is strengthening. But the firmer growth trend in the PMI has yet to find corroboration in the widely followed ISM Manufacturing Index, which ticked lower last month, settling at a virtually flat reading.
Meanwhile, this week’s hard-data update on industrial production for October offered the encouraging sight of stronger manufacturing activity via the Federal Reserve’s estimate. Although headline industrial activity weakened last month, the manufacturing component posted its first monthly increase since July.
Deciding if the upbeat numbers add up to a genuine sign of things to come is still a work in progress and so the isolated hints of progress to date could still turn out to be noise in an otherwise ongoing manufacturing recession. But the case for optimism will certainly strengthen if today’s data from the Kansas City Fed, and Monday’s update from Markit, dispense relatively upbeat news.
Meantime, there’s no shortage of skeptics. “We doubt the October (data) marks the start of a sustainable rebound,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in response to the upbeat Fed data from earlier this week. “But reports of the death of the sector have been exaggerated.”