More Good Economic News: ISM Manufacturing Index Jumped in July

This is an economic update provided by our friends at Goldman Sachs & Co.

Economic & Market News
ISM Manufacturing jumped to 48.9 in July and nearly every component showed a meaningful rise. An increase in the inventories index suggests moderation in the deep rate of liquidation (a positive for GDP), but at 33.5 remains depressed.

Construction spending rose 0.3% in June (-10.2% yoy). The composition of the report was as we hoped - more residential (+0.7%), less private non-residential (-0.5%), and some evidence of public spending (+4.6%).

Personal income fell 1.3% in June (-3.4% yoy), driven by removal of one-time stimulus payments of $250 paid to retirees in May plus a drop in wages, salaries, and dividends. Personal spending rose 0.4% (-2.2% yoy) but edged lower in real terms. As income fell more than spending, the savings rate fell to 4.6% from 6.2%.

ISM Nonmanufacturing fell to 46.4 in July indicating ongoing contraction outside of manufacturing.

The labor market had one of its most positive readings in nearly a year. Nonfarm Payrolls fell 247k in July, the smallest decline since July 2008, and figures for prior months were revised up modestly. The 0.1% drop in the unemployment rate, to 9.4%, can be attributed primarily to large declines in labor force participation in June and July rather than meaningful improvement in the rate. Other positive signs include increases in the workweek and average hourly earnings.