September 4, 2012 / 2:13 PM / 7 years ago

Instant view: Manufacturing sector shrinks for third straight month: ISM

NEW YORK (Reuters) - Manufacturing shrank at its sharpest clip in more than three years in August, the third month of contraction in a row, and firms hired the fewest workers since late 2009, a survey on Tuesday showed.

U.S. July construction spending falls 0.9 pct

COMMENTS:

JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON

“It’s a disappointing number that can bring the Fed a step closer to offering more support to the U.S. economy. The construction number also added to the disappointing tone of the ISM and as a result we have seen the dollar surrender some of its early gains.”

MICHAEL SHELDON, CHIEF MARKET STRATEGIST, RDM FINANCIAL, WESTPORT, CONNECTICUT

“ISM came out a little bit weaker than expected. The numbers are not terrible but not all that encouraging either. Specifically, production fell to a multi-month low and new orders fell and inventories rose. One way to look at underlying strength is to look at new orders minus inventories, and that was negative for the second straight month.

“Also new export orders remained under 50.”

TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

“It is without question a soft report on manufacturing and what is particularly disconcerting is that the new orders index deteriorated again. It has become increasingly clear that the manufacturing sector is losing momentum. This soft report leading into Friday’s payrolls will only solidify additional action from the Fed if we see another soft jobs report.”

JOE DEGERONIMO, CHIEF DEALER AT SMBC, NEW YORK

“ISM was as expected and not much reaction in the market. I think we hold in the $1.2550/1.2650 area on the euro, probably until Thursday with ECB comments.”

“There is also a closely watched technical level in U.S. dollar/Canadian dollar at 98.40 with a lot of stop losses clustered around that point. Break that and the greenback is on a run.”

PATRICK O’KEEFE, DIRECTOR OF ECONOMIC RESEARCH AT J.H. COHN IN NEW YORK

“Given everything we see internationally in terms of demand for our manufacturers, a little slowdown is to be expected, especially with the euro zone still under pressure and emerging economies experiencing relatively slow growth. Domestically, new orders for manufacturing were up a bit but not robustly so it isn’t unexpected to see something a bit more cautious.”

MARKET REACTION

STOCKS: U.S. stocks edged lower.

BONDS: U.S. Treasury debt prices pared their losses.

FOREX: The dollar trimmed its gains versus the euro.

Americas Economics and Markets Desk; +1-646 223-6300

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