US Manufacturing PMI dropped to its lowest since January (54.0 May vs 54.10 April) but rose modestly from early month preliminary indications. So despite the harshness of the winter weather and the port strikes, US manufacturing is worse now than at any time since the peak of piss-poor-weatheriness. New orders rose at the weakest pace since Jan 2014 and input costs rose, and Markit suggests The Fed wait on rate hikes and despite Bill Dudley's utterances, Markeit notes the "survey provides further evidence that the strong dollar is hurting the economy." Against this weakness, ISM Manufacturing - in all its seasonally-adjusted glory, rose and beat by the most since Oct 2014 with new orders rising (umm?) and prices paid surging. And finally, construction spending - having not risen for 3 months - it recovered considerably, spiking 2.2% MoM - the most in 3 years.
US Manufacturing PMI weakest since January 2015...
[6]
Markit is imploring The Fed to stay easy... [7] Commenting on the final PMI data, Chris Williamson, Chief Economist at Markit said:
“With manufacturers reporting the smallest rise in new orders since the start of last year, the survey provides further evidence that the strong dollar is hurting the economy. Falling exports and slumping profits were two weak links in the economy during the first quarter and look set to act as ongoing drags in the second quarter.
“While the economy still looks set to rebound from the decline seen in the first quarter, the extent of the second quarter recovery therefore remains highly uncertain and could well disappoint.
“It is encouraging to see employment growth holding up so well, with May seeing an increased rate of job creation in the manufacturing sector. But employment can often be a lagging indicator and payroll numbers will inevitably come under pressure if order book growth fails to improve in coming months.
“It therefore remains too early to take a reliable reading on the health of the economy and the data flow over the summer will be crucial in determining the timing of the first Fed rate hike.”
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But on a global basis the PMIs appear to be mean-reverting - in their seasonally-adjusted magicness...
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Back to the US and ISM Manufacturing ignored PMI and jumped, beating expectations by the most since Oct 2014
[8]
Respondents noted:
"Economy is showing signs of improvement." (Food, Beverage & Tobacco Products)
"Automotive is still strong. However, steel prices have dropped due to overcapacity and the strong US dollar." (Fabricated Metal Products)
"Overall business is steady. Employment in this area is up, a good sign." (Transportation Equipment)
"Strong spring demand in agriculture." (Chemical Products)
"The exchange rate on the dollar is hurting our sales in Asia. The conversion rate is lowering our profit in Europe where we sell in Euros." (Computer & Electronic Products)
"Sales are starting to stabilize and show improvement from prior months, Year to Date (YTD). Concerns still exist with the overall economy." (Apparel, Leather & Allied Products)
Continued challenges in markets related to oil and gas industries." (Miscellaneous Manufacturing)
"Oversupply is continuing to tighten profit margins." (Wood Products)
"West Coast port issues have eased up and our incoming imports are flowing again." (Machinery)
"Chemicals pricing seems to have bottomed and is slowly rising again." (Plastics & Rubber Products)
[9]
For some context... New orders dropped in reality but were seasonally adjusted to an increase!
[10]
And finally Construction spending.. spiked by the most in 3 years... which has not ended well previosuly...
[11]
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Finally, we leave you with this...
[12]
The biggest diveregnce on record.
Charts: Bloomberg
