US Manufacturing & Services Surveys Disappoint In Early July Look

Having rebounded dramatically in May and June, US PMI surveys for manufacturing and services were expected to continue their resurgence into expansion territory in preliminary July data.

  • Markit US Manufacturing PMI MISS 51.3 vs 52.0 exp vs 49.8 prior

  • Markit US Services PMI MISS 49.6 vs 51.0 exp vs 47.9 prior

And as the chart below shows, macro surprise data is starting to lag again as hope-filled expectations are missed...

Source: Bloomberg

The Composite index rebounded to 50.0...

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit, said:

While the stabilisation of business activity in July is welcome news, the lack of growth is a disappointment. Moreover, a renewed acceleration in the rate of loss of new business raises concerns that demand is faltering. Many companies, notably in consumer-facing areas of the service sector, linked falling sales to re-imposed lockdowns.

Firms’ costs have meanwhile spiralled higher, surging at the steepest rate for seven years in the service sector, in part due to the additional burdens of safeguarding against the coronavirus.

“Thankfully, the job-shedding seen over the prior four months has come to an end, but companies remain wary of taking on more staff given the weakness of current order books. Future expectations have improved, however, with optimism rising to the highest for over a year, as increasing numbers of firms see better times ahead. Hopes are qualified, however, by uncertainty over the coronavirus outbreak and the political environment as November’s election draws closer.

Will bad news be good news for stocks? Or does it have to get worse first?