US Manufacturing surveys (PMI and ISM) both agreed that October saw a modest rebound (despite ISM still in contraction) and analysts expected Services surveys to show a similar improvement, but that was not to be
US Manufacturing PMI 51.3 - expansion (up from 51.1 prior)
US Manufacturing ISM 48.3 - contraction (up from 47.8 prior)
US Services PMI 50.6 - expansion (down from 50.9 prior and below 51.0 exp) - weakest since Feb 2016
US Services ISM 54.7 - expansion (up from 52.6 prior and above 53.5 exp)
So, once again - a mixed picture - up in ISM and down in PMI...
While the headline jumped, we note that 6 components are down and only 4 up...
And in case you wondered how this was possible? It's simple as one respondent explains:
“Beginning of a new fiscal year brings a tremendous amount of spending.” (Public Administration)
Not everyone is excited:
“Our business remains at the same level. There is no expectation for new orders, since clients normally do not make capital-expenditure decisions in the last quarter. Our only expectation is with regards to the U.S.-China trade deal outcome.” (Mining)
"Business is still lower than this time last year due to tariff issues and a soft market.” (Wholesale Trade)
Commenting on the latest survey results, Chris Williamson, Chief Business Economist at IHS Markit, said:
“Although October saw signs of manufacturing pulling out of its recent soft patch, the far-larger service sector remained in the doldrums as inflows of new work failed to grow for the first time since 2009.
“With inflows of new work drying up, firms are relying on previously-placed orders to sustain current output growth, meaning the rate of expansion could weaken further in coming months if demand doesn’t revive.
"Hence we’re seeing jobs being cut at an increased rate among surveyed companies, with employment falling for a second successive month and to a degree not seen since 2009. Such a weakening of the survey’s employment index will likely feed through to the official jobs numbers as we move toward the end of the year.
“The news was by no means all negative, however, with firms becoming more optimistic about the year ahead, buoyed by hopes of an easing of trade tensions and stimulus from lower interest rates. However, the overall degree of optimism remains sharply lower than this time last year as companies remain concerned by ongoing uncertainty about the outlook.”
Finally, Williamson notes that taken together, the manufacturing and service sector surveys consequently suggest that the US economy got off to a disappointing start in the fourth quarter, consistent with GDP growing at an annualized rate of less than 1.5%.
Using ISM data, we note that the Composite Index (whether driven by jobs mix - 14% Manu, 86% Serv; or earnings mix - 68% Manu, 32% Serv) has improved in October (with the earnings-weighted index out of contraction)...
Globally, Germany is the stand out in terms of collapse...
Not exactly hinting at the lows being in