Purchasing Managers’ Indices (PMIs) are economic indicators derived from monthly surveys of purchasing and supply executives in private sector companies. They are diffusion indices, which means a reading of 50% represents no change from the previous period, while a reading under 50% implies respondents on average reported a deterioration. Their usefulness lay in being a leading indicator of GDP.
US manufacturing activity rebounded more than expected in August and the latest figure is very much at elevated levels. According to the Institute of Supply Management (ISM) September survey, its Purchasing Managers Index recorded a reading of 59.8, down from August’s reading of 61.3 and just under the expected figure of 60.1.
As NAB senior economist David de Garis put it, “Notwithstanding the tariffs and Hurricane Florence, the index remained high.” Over at ANZ, Daniel Been, who is ANZ’s Head of FX Strategy, agreed. “Overall, the ISM suggests economic activity is continuing to run hot, consistent with the FOMC’s interest rate profile.” Just last week, the US central bank’s Federal Open Markets Committee (FOMC) voted unanimously to raise the US official interest rate by 25bps in light of a strengthening labour market and robust business and household sectors.
US bond yields finished the day higher. 2-year, 10-year and 30-year bond yields all closed 2bps higher at 2.82%, 3.08% and 3.23% respectively. The US dollar was stronger against the euro and yen but a tad weaker against sterling.