US ISM Manufacturing: Solid but orders are coming off a low base –  Wells Fargo

The ISM Manufacturing for June jumped to 52.6, above expectations. According to analysts at Wells Fargo, the report is clearly positive news for the factory sector, but the jump may just reflect the relief about reopening rather than a signal full rebound for a sector that still faces major headwinds.

Key Quotes: 

“The ISM report crushed expectations, but you should still temper yours when it comes to the manufacturing outlook. Orders surged from a low base and while factories aren’t firing people, they’re not yet hiring either.”

“In a stunning turn for the positive, new orders climbed to 56.4 from 31.8 the prior month. Order backlogs rebounded as well and although the 45.3 reading here is still in contraction, it too had a big jump from 38.2 the prior month. 

“Factories are not laying off workers to the extent that they were in May, but a below-50 read for employment, while an improvement, still suggests major rehiring is not happening yet.”