US manufacturing ISM Boosted by weather, capped by the dollar

After five consecutive monthly declines, the manufacturing ISM index is expected to post a modest gain in April. A 1.5 increase to 53.0 is likely, which would mark the highest reading since January. 

The manufacturing sector has been impacted by a number of shocks in recent months. Some of these shocks - namely the weather and the effect of the West Coast ports shutdowns - should reverse in the coming months, providing some upside. 

However, the upside will be capped by the dollar's strength which has rendered the US manufacturing sector less competitive. At 53.0, the manufacturing ISM would be consistent with GDP growth of 2.7%. 

"Assuming no change in the non-manufacutirng ISM, our forecast would put the composite index at 56.1 which points to GDP growth of 3.3%. This is consistent with the expectations for a rebound in activity in the second quarter", says Societe Generale.