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US Manufacturing Economy Weakest In 2 Years As New Orders, Prices, Jobs Slow

Submitted by Tyler Durden on 09/23/2015 09:52 -0400

On the heels of dismal China manufacturing data (worst PMI since March 2009) and mixed-to-weaker European data, US Manufacturing PMI printed a September preliminary 53.0 (flat from 53.0 in August and modestly better than expectations of 52.8). This is the equal lowest print since Oct 2013. Underlying components are mixed (factory prices dropped for first time in 3 years and new orders and employment slowed), but, confirming what Yellen told us last week (that the US economys is to fragile to handle a 25bps rate hike), Markit notes, "the sluggish growth, weaker forward-looking indicators and downturn in price pressures all point to the Fed holding off with rate hikes until next year."

It appears US decoupling is once again proved a timing issue more than reality...

Factory gate charges dropped for the first time since August 2012. Anecdotal evidence from survey respondents suggested that falling commodity prices, intense competitive pressures and softer demand conditions were all factors contributing to price discounting in September.

Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said:

“Manufacturing remained stuck in crawler gear in September, fighting an uphill battle against the stronger dollar, slumping demand in many export markets and reduced capital spending, especially by the energy sector.

“The survey is indicating the weakest manufacturing growth for almost two years, meaning the sector will have acted as a drag on the economy in the third quarter.

“The disappointing performance of the goods producing sector has so far been offset by stronger expansion in the larger services sector, which means the economy looks to have grown at a reasonable 2.5% annualised pace in the third quarter, but there are question marks over whether this growth can be sustained as we move towards the end of the year. Inflows of work showed the smallest rise since the start of 2014, and job creation has also slowed.

“The sluggish growth, weaker forward-looking indicators and downturn in price pressures all point to the Fed holding off with rate hikes until next year.”

Charts: Bloomberg

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Wed, 09/23/2015 - 09:53 | 6583451 slaughterer

Markit (simplified version): Free cash for another year!

Wed, 09/23/2015 - 10:02 | 6583491 Hype Alert

Definitely need to file this under Not A Problem.

Wed, 09/23/2015 - 10:21 | 6583601 StackShinyStuff

Transitory

Wed, 09/23/2015 - 09:57 | 6583468 zorba THE GREEK

The U.S. still manufactures stuff? All I ever see is boarded up factories and empty warehouses.

I wonder where this mythical manufacturing takes place.

Wed, 09/23/2015 - 09:59 | 6583479 papaswamp

Cluster bombs for Saudi Arabia.

Wed, 09/23/2015 - 10:03 | 6583493 KnuckleDragger-X

We still manufacture a lot of stuff, just not as much as 30 yeas ago. The government granted a lot of special tax 'incentives' to the special companies like GE to move a lot of their factories to places like China to help those countries 'develop' an economy. Of course now we all run down to Wally World to buy it and then bitch about the state of the economy and why there aren't any jobs above burger flipper grade.....

Wed, 09/23/2015 - 10:28 | 6583623 RobD

I work for one of the major gaming companies(slot machines) and we are definitely in a recession inside the depression. I write the game software so I get a feel of how urgent the need for new games are by how fast they want the game to make it through the system and out to the customer. Up until this year we have always tried to get the game out the door as quickly as possible but starting late last year the pressure has dis-appeared. My last game is sitting on the shelf and the game I'm developing right now will not be released until Q3 2016. I have not actually "worked" on the game for two weeks as my part is pretty much done, so I sit here getting paid to read the hedge lol. Not sure how long this will last.

Wed, 09/23/2015 - 13:35 | 6584528 schnydz

heh. You guys hiring?

Wed, 09/23/2015 - 13:43 | 6584333 InnVestuhrr

I have ownership in a few companies that manufacture mechanical and electronic products as much in the USA as is pragmatic and profitable.

Almost all the high-volume things that can be manufactured at lower cost in developing countries with intelligent, educated workers with good work ethic who are willing and eager to learn (eg China, India, Vietnam, etc) are gone from the USA, for obvious pragmatic reasons. Product volume is a key factor because there is a big initial cost and ongoing cost in getting setup to manufacture in developing countries.

We do all of our design, development and prototyping in the USA. I would never consider outsourcing any of these critical core functions outside our own company, not to mention outside the USA.

First, nearly ALL component parts that you need to incorporate in your product and search for in catalogs (hardware like switches and fans, integrated circuits, circuit boards, sub-assemblies, etc) are ALL made in developing countries. These component parts will never be made in the USA again.

Second, we get some parts (eg chassis) manufactured in developing countries,
IF the total cost, which includes the many hassles of distance and different organization and different culture, make it more efficient and profitable,
AND ONLY IF we are not giving the supplier any of our unique proprietary technology, eg software, circuit design, etc. I would NEVER send any of our unique proprietary technology to ANY organization in China - that would be inviting theft and clones.

I also have a business that manufactures very unique specialized sophisticated design sport fishing products, and I manufacture ALL of these in the USA, even though they are low-tech in terms of materials and manufacturing processes because the Chinese would steal and clone these products immediately.

The ONLY products that will be manufactured in the USA are those of low volume and those of high technology design and manufacturing. Eventually the Chinese will steal these as well and the USA will become ONLY a service and retail economy. I am grateful that I will be worm shit by then.

Wed, 09/23/2015 - 10:04 | 6583472 two hoots

Like an old growth forest we have reached maturity. Things will change slowly, stuff will die and rot, new growth will sprout and invasive plants will change the landscape forever.

Wed, 09/23/2015 - 10:09 | 6583528 slaughterer

"new growth will sprout"

New Growth => burger & burrito chains, social narcissist sites, cameras for taking selfies and phones to send these, drones for population surveillance and attack, 3D-printers for printing toys, streaming B-movies, discount grocers...

Wed, 09/23/2015 - 10:29 | 6583628 bbq on whitehou...

More like a bio dome, no winds, no fires, no natural light and no compitition for the propped up trees that can no longer hold up their own weight. Not really a forest at all. Forest allow natural processes to work not so in developed markets.

Wed, 09/23/2015 - 10:03 | 6583495 spanish inquisition