Chart of the Week

According to the latest release from the Institute for Supply Management (ISM), the manufacturing sector continued to expand in August. While expectations were for a slowdown, the upward move up in the Purchasing Managers Index to +56.3 had its roots in capital expenditure growth and expanding international demand for U.S. manufactured products. The employment outlook was also strong, with 10 out of 18 industries reporting increased employment opportunities during August. Going forward, we will be monitoring this important indicator closely for signs of continued economic growth.

Consumer Confidence moved up modestly during August, with all of the gains coming from the future expectations component. Since the market was actually geared for a decline in confidence, this development was welcome news. Confidence is still well above the recession low of 2009 (top graph) and our differential gauge of “Future Expectations minus Present Situation” (bottom graph) continues to hold up even though consumers remain nervous about business conditions. Continued improvement in confidence going forward is an important wildcard that could energize equity markets as the holiday season approaches. Stay tuned for updates.