Goldman Sachs' Review Of December Manufacturing

Goldman Sachs commented on Friday’s ISM manufacturing index report.

According to analysts Kris Dawsey and Chris Mischaikow, the report “was weaker than expected in December.

"Separately," they add, "construction spending grew less than expected in November, but was revised up in prior months."

ISM manufacturing was 55.5 for December versus the Goldman estimate of 56.5 and the median forecast of 57.5. Construction spending was -0.3 percent for November versus the Goldman estimate of +0.4 percent and median forecast of +0.4 percent.

The analysts highlighted three areas:

1. “The ISM manufacturing index fell to 55.5 in December (vs. consensus 57.5), from 58.7 in November. By component, new orders (8.7pt to 57.3) and production (5.6pt to 58.8) both declined, while employment rose modestly (+1.9pt to 56.8).

“New export orders reversed their November gain (3.0pt to 55.0). Prices paid (6.0pt to 38.5) continued to decline probably largely due to lower oil prices.

“Qualitative commentary was broadly focused on oil prices and delivery interruptions from West Coast ports," they added.

2. “Construction spending declined 0.3 percent in November (vs. consensus +0.4 percent). Residential construction rose 0.9 percent, consistent with the signal from housing starts in recent months.

“Nonresidential construction fell 1.0 percent, as public construction reversed its sizable October gain. Private nonresidential construction edged down 0.3 percent, with softness in office, commercial, and healthcare categories.

“Despite the November disappointment, total construction spending was revised up one-tenth in October (to +1.2 percent) and seven-tenths in September (to +0.6 percent).”

3. Goldman Sachs also left its “Q4 GDP tracking estimate unchanged at 2.6 percent.”