Last month's exuberance-filled, and instantly extrapolated, Markit US PMI print at the lofty levels of 57.1 (proving that the weather-delayed pent-up-demand was truly back) has been dashed on the shores of ugly reality. March's print dropped to 55.5, missing expectations by the most since Feb 2013 as jobs grew at a slower pace and factory orders declined. This slowing in the US economy's growth adds to last night's weakness in Chinese growth. Given weather was not a majr issue in March, what excuse can we find for this?
In the detailed report breakdown of components, also notable is the decline in New Orders from 59.6 to 58.0, as well as the Employment index declining from 54.1, to 53.9
What about the weather: after all Markit was so vocal to blame snow in the winter in the last few months, even though the index magically soared to record? Well, apparently, the weather got better in March.
Reports from survey respondents cited improving economic fundamentals and, to a lesser degree, an on-going catch-up effect following weather disruptions earlier in the year.
Wait, the PMI index declined even as the weather got better? Huh? Yup. Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said:
“The manufacturing PMI adds to evidence that the sector has shrugged off the weather-related weakness seen earlier the year, with strong demand encouraging firms to expand and hire new staff at a robust pace.
“The buoyant growth in March rounds off the best quarter for three years, indicating that the sector should provide a robust contribution to GDP in the first quarter. Growth was not as strong as February, but that’s in many respects only to be expected after last month’s numbers had been boosted by the rebound from January’s severe weather. The fact that the output and new orders indices remained so strong in March is very encouraging news that the sector has come through the weather-related soft patch and continues to play an increasingly important role in the economic upturn.
“Particularly welcome was the sustained upturn in hiring, adding to evidence to suggest that firms’ retain an upbeat outlook.
“One area of concern is the sluggish growth of exports, but this weakness is being more than offset by strong domestic demand.
”The survey is broadly consistent with manufacturing output rising at an annualised rate of approximately 4% in the first quarter and job creation in the sector running at around 10-15,000 per month. These are encouraging numbers that will no doubt add to the case for the Fed to continue reducing its asset purchases.”
Finally, what does this data tell us about the upcoming April NFP:
A solid rate of job creation was sustained across the manufacturing sector in March. Staffing levels have increased in each month July 2013 and the rate of employment growth was stronger than seen on average over this period. Survey respondents widely linked staff recruitment to improving confidence about the business outlook and greater optimism about the prospects for the U.S. economy as a whole.
In other words, it could be better... Or it could be worse than expected.