US: ISM manufacturing sector index to tick modestly higher - TDS

Research Team at TDS, suggests that a more encouraging picture is beginning to emerge among the various US regional manufacturing sector PMIs, pointing to a further pickup in positive momentum in the sector.

Key Quotes

“In June, TD expects the ISM manufacturing sector index to tick modestly higher, rising to 51.8 from 51.3. The improvement in the index should come from gains in the key forward-looking indicators such as new orders and production. The production sub-index should also rebound. The overall outlook for the manufacturing sector remains quite favorable, reflecting the combination of the improving domestic backdrop, rising energy prices and the diminishing impact from the strong dollar.

Risks to the forecast

We see upside risks to our above-consensus forecast. Indeed, while the sharp rebound in the various regional PMIs might be more a function of a catch-up to their past underperformance, the robust showing in the Markit manufacturing index underscores the upside risk to this call.

Foreign Exchange

In a post-Brexit world, the data we think will be less of a driver for currencies, at least in the short-term and until we hear from Chair Yellen. Taken in conjunction with the upcoming long holiday weekend, we suspect that FX markets may ‘check out’. As such, we expect the USD to remain very much contained regardless of the outcome in the ISM. Longer-term, we think this prolonged period of uncertainty will be supportive for the USD as capital inflows are likely to pick up as the global safe haven basket shrinks.”