Industrial economy still permanent tinnitusDespite making solid profits Suppliers and working headwinds. This is good news for industrial stocks, although investors are more concerned about Variable Omicron Covid-19 at the moment.
The Supply Management Institute’s Purchasing Managers’ Index, or PMI – which is released on the first business day of every month unless the New York Stock Exchange is closed –Came at 61.1, up from 60.8 in October. Level 50 indicates that the industrial economy is growing. Above 60 level is very powerful.
The new orders portion of the index, which is a reading on future demand, came in at 61.5, up from 59.8 in October. This is another powerful reading that investors should absorb.
Overall, the report is good news for industrial stocks, although industrial stocks usually only react highly when the PMI report comes as a big surprise. The November number is not a huge surprise. It is a continuation of the positive trend.
(Stock Index: XLI) It rose 1.8% in early trading Wednesday.
Shares of CAT rose 1.9%. The PMI is not hurting stocks, but the market as a whole is rebounding after Tuesday’s sell-off in Omicron.
They rose 1.2% and 1.5%, respectively, on Wednesday.
While the report looks good, manufacturers are still dealing with low inventories and labor issues. But things are improving in those areas, too.
“The US manufacturing sector remains in a demand-driven supply chain constrained environment, with some indications of a slight improvement in employment and supplier delivery,” said Tim Fury, head of the ISM PMI Poll in the monthly release. It is still difficult to find workers and absenteeism related to Covid remains an issue,” however, [survey] The team’s sentiment remains deeply optimistic.”
Pricing PMI is also lower, easing inflation fears. The price component of the PMI was 82.4 in November, down from 85.7 in October. Level 50 indicates that prices are on the rise, so level 80 is very high. While pricing has been an issue, profit margins are holding up.
“There are some industries that struggle to pass on higher costs,” Fiore said, but he adds that, for the most part, prices have been passed on to the consumer. This means that the profit margins have held up. “The year 2021 has been very profitable.”
For 2022, it’s too soon to know how things will turn out, but Fiore noted manufacturers are a resilient group.
Write to Al Root at email@example.com