Factory Orders Above Estimates, ISM Non-Manufacturing Below Estimates, Prices Paid Plunges

- Factory Orders for August were unchanged versus estimates of a .2% decline and a 1.0% decline in July.
- ISM Non-Manufacturing for September fell to 52.9 versus estimates of 56.0 and a reading of 57.0 in August.

BOTTOM LINE: Orders placed with US manufacturers were unchanged in August, Bloomberg reported. Volatile civilian aircraft orders fell 22%, while orders for automobile rose .7%. US automakers are cutting production through year-end and adding incentives to further clear out inventories. Orders for capital goods excluding aircraft and defense, a gauge of future business investment, rose .4% versus a .6% gain the prior month. The inventory-to-shipments ratio is 1.17 months, slightly above all-time lows of 1.15 months in May. I continue to expect near-term pressure on manufacturing related to auto production cutbacks before more strength near year-end.

Service industries in the US expanded at a slower pace in September, Bloomberg reported. The new orders component of the index rose to 57.2 from 52.1 in August. The prices paid component of the index plunged to 56.7 versus a reading of 72.4 the prior month. The employment component of the index rose to 53.6 versus a reading of 51.4 the prior month. The average price of gas fell to $2.33 at the end of September versus $2.84 on Aug. 28. I expect the ISM Non-manufacturing Index to bounce-back strongly next month on falling gas prices, more optimism, lower interest rates, a healthy job market and surging stock market.