April's Manufacturing PMI printed a minimally disappointing 54.1 (against 54.2 prior and expectations) - its lowest since January and hardly the post-weather Q2 surge everyone was hoping for. New Orders and Production were the weakest since December and export business fell for the first time in 5 months and input prices dropped for the 4th month in a row; all leading Markit to demand The Fed remain patient. ISM Manufacturing missed expectations and has not risen for 5 months (its longest streak since the recession) with a contraction in the employment index to lowest since Sept 2009. And then Construction Spending plunged 0.6% (against a +0.5% exp.) - the 7th miss in 10 months and worst April print since 2009.
Construction Spending was dismal...
... Growing at the lowest annual pace since the crisis, and just a fraction away from being the latest confirmation of a recession. One thing is certain: Q1 GDP will now be revised negative.
ISM Manufacturing remains at 2 year lows...
As employment collapses...
ISM Survey respondents:
- "Low energy costs continue to help the bottom line." (Food, Beverage & Tobacco Products)
- "Automotive industry is still very strong." (Fabricated Metal Products)
- "Business holding relatively flat in North America, softening a bit globally." (Transportation Equipment)
- "Foreign Exchange is reducing revenue, but volume has remained consistent." (Chemical Products)
- "International shipments still being delayed by the strikes at ports on the West Coast." (Computer & Electronic Products)
- "Production and orders remain strong and steady." (Primary Metals)
- "Business conditions are good, with slowly rising demand for our products." (Miscellaneous Manufacturing)
- "Labor, both skilled and unskilled, remains difficult to find qualified individuals." (Furniture & Related Products)
- "Continuing to expedite shipments through Vancouver due to ongoing port delays." (Machinery)
- "Customers perceive that raw materials prices have bottomed out so are now releasing orders." (Plastics & Rubber Products)
Uhm, did ISM forget it is no longer February when using the response template? The port strikes are over.
Not the post-Q1-weather bounce everyone was looking for.
Commenting on the final PMI data, Chris Williamson, Chief Economist at Markit said:
“With manufacturing output growth slowing to the weakest seen so far this year and exports falling for the first time since November, the survey results raise worries that the dollar’s appreciation is hurting the economy.
“The slowing in the economy is accompanied by a renewed weakening of price pressures, linked to the exchange rate bringing down the cost of imports. Input prices showed one of the steepest falls seen since the recession, a cost-saving which producers often passed on to customers. Prices charged rose at the slowest rate seen for almost three years.
“The weakening growth trend and fall in price pressures add to a growing clutch of disappointing numbers which suggest the Fed will err on the side of caution and hold off from rate hikes until a clearer picture emerges of the economy’s health. Any policy tightening therefore looks likely to be deferred until at least September, but the fact that both manufacturing and services continue to grow at reasonably robust rates at the start of the second quarter suggest that rate hikes towards the end of the year should not be ruled out.”
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It appears Markit is desparate not to be the only macro indicator flashing "all clear" as everything elese goes pear-shaped, and is preparing to converge with the Atlanta Fed in the coming weeks.