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Good News and Somewhat Good News

The monthly economic data cycle kicked off with two early reads on activity for September. First is the Institute for Supply Management’s Purchasing Managers’ Index, or PMI, a survey of purchasing managers at U.S. manufacturers. The composite PMI rebounded to 51.5 from 49.4 in August. Readings above 50 suggest expansion, and readings below 50 suggest contraction.

Two key components also rebounded in September.  The new orders index jumped to 55.1 from 49.1 in August, while the production index rose to 52.8 from 49.6 (Chart 1). Combined, these data suggest a more positive outlook for the manufacturing sector in coming months. That qualifies as good news.

The second new data point is unit-vehicle sales from auto manufacturers. Unit-vehicle sales came in at a seasonally adjusted annual rate of 16.9 million in September. That is down from the August pace and somewhat below the record setting pace achieved for all of 2015. But it is still considered a generally high level by historical standards. So this qualifies as somewhat good news.

Interestingly, the gains in light vehicle sales are being driven by light trucks, pickups and SUV’s, which continue to take market share away from autos (Chart 2, which shows seasonally adjusted light vehicle sales).  This is a continuation of the longer-term shift in preference by American consumers and helped along by low gas prices.

Overall, these data given an early positive tone to the economic outlook as the fourth quarter gets underway.

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