U.S. ISM manufacturing index rise in November, manufacturing sector likely to continue growing

The U.S. Institute for Supply Management manufacturing index rose in November at the most rapid pace since June. The index was up 1.3 points to 53.2, well above the consensus projection of a rise to 52.5.

Most of the subcomponents of the headline index recorded increases. Backlog of orders, inventories, supplier deliveries and production recorded strong gains. On the other hand, the import sub-index dropped 1.5 points to 50.5, remaining in expansionary territory. New exports also dropped marginally to 52; however, it suggests growth in exports.

The sub-component for prices paid continued to be unchanged at 54.5, whereas the employment index dropped 0.6 points to still healthy level of 52.3, noted TD Economics. The spread between inventories and new orders, which is a leading indicator of activity, continued to be largely unchanged at 4.

Out of 18 industries, 11 registered growth, led by miscellaneous manufacturing, petroleum & coal products, computer & electronic products and paper products.

The ISM index report for November implies that the manufacturing sector continued to be on a strong footing in November, in spite of the strengthened currency and considerable policy uncertainty related to the U.S. election. Most subcomponents registered modest to moderate rises in November. As the spread between new orders and inventories stayed at a healthy level, it implies that manufacturing sector is likely to continue to grow, said TD Economics.

The drop in the exports component, although minor, underlines the divergence between externally-exposed and domestically-oriented manufacturers, according to TD Economics. In all, the dollar is likely to stay strong. Meanwhile, it seems that the external environment is rebounding. The November PMIs across Europe and Asia have been widely higher, implying that global manufacturing activity is on a modes upward trend. The recent increase in oil prices, which is likely to keep domestic drilling activity rising modestly, is expected to underpin investment in the energy sector going forward after several quarters of drag, stated TD Economics.

At 03:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -53.6205. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex