The pace of growth in the U.S. manufacturing sector unexpectedly slowed in October, though it managed to stay in expansion territory, according to an industry report released on Tuesday.
U.S. construction spending growth slows on government drag
Growth in U.S. construction spending slowed in September as governments cut back on building and maintaining schools and public transportation, a government report showed on Tuesday.
MARC PADO, U.S. MARKET STRATEGIST, CANTOR FITZGERALD & CO. IN SAN FRANCISCO
The prices paid was a big drop and also the inventory component was a big drop ... Companies got very conservative, they got worried, just like everybody else did, about a potential recession after the events of August ... The headline number is reflecting not only the decline in inventory, which is actually positive, but the decline in prices, which is the results of a lot of the concerns of a recession. As bad as the headline number was there is a silver lining.
RICHARD DEKASER, ECONOMIST, THE PARTHENON GROUP, BOSTON
The details don't look as bad as the headline. More broadly, the deterioration in sentiment has led businesses to manage conservatively. You have the euro zone situation lurching from bad to worse. There is a bunker mentality. Businesses are keeping inventories lean.
We are still going to see a decent quarter. We are going to see GDP with a 2 (percent) handle. There is not a lot of opportunity for further reduction in inventory.
PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK
The ISM report is better than the headline suggests because orders were strong and inventories showed a decline. Inventories are being kept lean and the slowdown in inventories occurred due to a small slowing in production.
The news is that demand is picking up a bit. It could be stronger, but managers are being careful in terms of ramping up production. Employment is continuing to grow, though slightly more slowly. But it's evidence of decision-maker confidence.
DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT
Small uptick in jobs, and most of the weakness is in lower inventories. With orders up and over 50 this is actually a pretty firm report and so overstates the headline weakness. Note the strong drop in prices paid -- better for profits and inflation. A negative is exports which fell to 50, weakest since June '09.
The market has bigger fish to fry and this is having no impact on the market whatsoever.
MARK VITNER, SENIOR ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA
It is not that surprising that it fell off because the weakness that we saw in the regional surveys never showed up in the national index and they tend to move together over time so the fact that they are a little out of sync shouldn't set off any alarms. The regional indexes have all turned up recently so I think that we will probably see the national index come up over the next couple of months too. But there is no question that manufacturing activity has slowed a bit in response to the weakness that we are seeing out of Europe.
What this report really highlights is that the economy is really still stuck in slow growth mode and we are unlikely to shake that any time soon.
TOM PORCELLI, CHIEF ECONOMIST, RBC CAPITAL MARKETS, NEW YORK
It was weaker than expected. What's interesting is that the Chicago PMI has a very strong correlation with the ISM. In terms of the detail here, if you wanted to look for a bright spot it would be that new orders went back into positive territory. You didn't see a lot of progress in the other components. At the end of the day this is a mixed report.
We're starting to see a broader slowdown globally. You had global activity moving along at a reasonable pace but that's starting to fade.
STOCKS: U.S. stocks slightly extend losses.
BONDS: U.S. bond prices briefly extend gains.
FOREX: The dollar holds gains versus euro.