U.S. manufacturing index indicates stronger domestic spending

After decelerating considerably from its 2014 average of 55.7, U.S. manufacturing is showing signs of life again with two consecutive monthly gains. 

General improvement in U.S. manufacturing reflects stronger domestic spending, but relatively tepid demand abroad. Improvement in euro area growth prospects, as witnessed in the PMI releases earlier today (and assuming an amicable resolution of the Greek crisis), is being offset by subdued activity in many emerging markets. Meanwhile, the strong dollar is and will continue to be a competitive headwind. Still, with stronger domestic momentum, alongside what should be improving foreign demand over the next several months, U.S. manufacturing should continue to improve over the remainder of the year. 

The underlying details were not quite as positive, and market reaction so far has been lackustre. Still, with admittedly volatile yet positive headlines out of Greece alongside the strong ADP employment report released earlier today, the DXY dollar index is up on the day and Treasury yields are up several basis points heading into the all important payrolls report tomorrow. TD Economics expects another +200k print, which should further firm market expectations for a 2015 rate hike.