Having hovered at its lowest level since January 2014, Markit's US Manufacturing PMI slipped even further to 53.4 (against expectations of 54.1). This is the weakest since October 2013 and the biggest miss since August 2013. Stunned, Markit notes, "while the survey data points to the economy rebounding in the second quarter, the weak PMI number for June raises the possibility that we are seeing a loss of momentum heading into the third quarter;" which is odd because every talking head has been proclaiming everything is awesome, "while a September rise still looks likely, given the ongoing strength of the service sector, any further deterioration in the data are likely to push the first hike into next year."
Well this is not what The Fed promised...
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As Markit notes,
Adjusted for seasonal influences, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™)1 registered 53.4 in June, down from 54.0 in May and the lowest reading since October 2013.
The latest expansion of production volumes was the weakest recorded by the survey since January 2014. Some manufacturers cited greater efforts to fulfil orders from inventories in June, as highlighted by the first reduction in stocks of finished goods since December 2014. Moreover, there were reports that softer output growth reflected a degree of caution about the business outlook, as well as concerns about the impact of the strong dollar on cmpetitiveness. Although new orders from abroad stabilized in June, this followed declines in export sales during each of the previous two months.
- ...there were reports that softer output growth reflected a degree of caution about the business outlook, as well as concerns about the impact of the strong dollar on competitiveness
- overall volumes of new work expanded at a solid pace in June, but the latest upturn was still the second-slowest since January 2014.
- some manufacturers noted that sharp declines in investment spending within the energy sector had weighed on new order volumes
- suppliers’ delivery times improved for the first time in two years. This was widely linked to an alleviation of transportation bottlenecks related to the west coast port strikes earlier in 2015.
Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said:
“Manufacturers reported a disappointing end to the second quarter, with factory output growing at the slowest rate for a year-and-a-half.
“While the survey data points to the economy rebounding in the second quarter, the weak PMI number for June raises the possibility that we are seeing a loss of momentum heading into the third quarter.
“The slowdown is being led by deteriorating export performance, which many producers in turn linked to a loss of competitiveness caused by the stronger dollar. Although stabilizing in June after declining in April and May, export orders have not shown any growth since February.
“Employment continued to rise, accelerating to show one of the strongest monthly gains since the recession, but the labour market tends to lag changes in order books. Firms are therefore likely to start cutting back on hiring unless demand revives in coming months.
“The survey results will add to further worries about the damaging impact of the strong dollar, and encourage the Fed to be cautious in terms of the timing the first interest rate hike. While a September rise still looks likely, given the ongoing strength of the service sector, any further deterioration in the data are likely to push the first hike into next year. Flash services PMI data for June are published on the 25th June.”
Charts: Bloomberg
