Manufacturing Data up in U.S., China and Europe

The Institute for Supply Management released its purchasing managers index for the U.S. manufacturing sector today, revealing a rise from 53.6 in November to 55.9 in December.  The rise was the fifth consecutive month rise for the index and the highest level for the index since 2006.  When the index is above 50 it illustrates an expansion and the greater the difference from the 50, the faster the growth.  December’s increase in the index was higher than expected as the markets anticipated an increase to only 54.3.  As would be anticipated this positive surprise had a positive reaction on the markets, the S&P 500 closed at 1,132.99 up 1.47% and the Dow Jones Industrial Average also rose 1.47% to close at 10,583.96.  World markets also rose as the HSBC China Manufacturing PMI rose to 56.1 in December from 55.7 in November and Markit Economics purchasing manager survey, focusing on a 16-nation euro area rose to 51.6 from 51.2.  Looking below we can see the details of the ISM’s release:

Above table and full report can be found at the ISM website

Although employment levels in manufacturing increased for the third straight month, the real employment level the market cares about won’t be released until Friday.

Oil

Oil prices made a quick jump today as crude oil futures went from below $80 to above $81, possibly uplifted by the positively surprising manufacturing data as investors reconsidered a higher demand for crude oil.  The cold weather in the northern U.S. was also charged as a factor in the increase as well as the tension between Russia and Belarus.  It is unlikely the jump is a prediction of a continued substantial increase in oil prices.  Oil prices closed above $81 on November 4th of last year and later fell to as low as $70 a month ago.  The majority of analysts are saying the best prediction is continued volatility.

The Almighty Dollar

The dollar fell 0.51%  to 92.89 yen while the euro rose 0.5% percent to $1.4389.

Real Estate

New construction fell in November by 6% to the lowest level since July 2003 at $900 billion for the month.  This decline was primarily due to less homebuilding and fewer commercial projects.

The same tune wasn’t being played in the United Arab Emirates today (or at least it was muffled by fireworks) as the Burj Khalifa, the world’s new tallest tower, was unveiled.  The tower reaches a height of 828 meters (the taller World Trade Center was 417 meters) and cost approximately $1.5 billion to create.  German architect Meinhard von Gerkan, who designed Berlin’s central train station, wasn’t impressed calling the Burj Khalifa “an economically pointless symbol of prestige, representing the power of money.”  Maybe Meinhard was unaware Burj Khalifa has the world’s highest pool 76 stories up.

Finally…

Some obvious insight from Bob Bach, the chief economist at brokerage Grubb & Ellis, “If banks aren’t lending because they’re coping with losses in their real estate portfolios, this could impede the economic recovery.”