So much for the huge China credit impulse spreading around the world. After this morning's extremely disappointing European data, US Manufacturing's flash PMI for May printed a disappointing 50.5 - its lowest since 2009.Under the surface the state of American manufacturing is even more disastrous as Markit notes, output is falling for the first time since the height of the global financial crisis, with factories hit by slowing growth of order books and falling exports.
It's rate-hiking time...A general lack of pressure on operating capacity was signalled by the latest survey data, with outstanding work at U.S. manufacturers falling for the fourth successive month in May.
U.S. manufacturers signalled the first reduction in output since September 2009 in May, although the rate of decline was only marginal. A number of monitored firms mentioned that uncertainty around the general economic outlook had caused clients to delay spending decisions, which in turn prompted firms to trim their production schedules.
As Markit's Chris Williamson warns, the weak manufacturing PMI data cast doubt on the ability of the US economy to rebound from its disappointing start to the year in the second quarter.
“The survey is signalling that manufacturing will act as a drag on economic growth in the second quarter, leaving the economy once again dependent on the service sector, and consumers in particular, to sustain growth.
“Output is falling for the first time since the height of the global financial crisis, with factories hit by slowing growth of order books and falling exports.
“Backlogs of work are also dropping at the fastest rate since the recession, meaning firms will be poised to cut capacity unless inflows of new work start to pick up again.
“The survey’s employment gauge is in fact already running at a level consistent with a further reduction in the official measure of factory payroll numbers.
“Any uplift in prices was largely due to higher commodity prices, notably oil. Core price pressures look to have been once again subdued by weak demand.”
Seems like a great time to be hiking rates?