US Manufacturing Weakest Since 2009: "No Comfort For Those Looking For A Rebound"

Following China's drop, Japan's plunge, and Brazil's crash, US Manufacturing PMI slipped once again to 50.7 - its weakest since September 2009 amid " subdued client demand and heightened economic uncertainty." New orders bounce is over as it fell to its weakest since Dec 2015 and worse still input costs are surging to 9 month highs as employment suggest payrolls will remain under pressure. ISM Manufacturing data improved marginally - leaving 50% of the last 10 months in contraction and 50% in expansion. The improvement seesm based on a rise in prices paid and customer inventories - hardly a positive sustainable trend. As Markit concludes, "for those looking for a rebound in the economy after the lacklustre start to the year, the deteriorating trend in manufacturing is not going to provide any comfort.”

ISM and PMI Manufacturing  indices had recoupled in the last 2 months after ISM's big plunge.

 

ISM Breakdown:

  • PMI rose to 51.3 vs 50.8 last month
  • New orders fell to 55.7 vs 55.8
  • Employment unchanged at 49.2 vs 49.2
  • Supplier deliveries rose to 54.1 vs 49.1
  • Inventories fell to 45.0 vs 45.5
  • Customer inventories rose to 50.0 vs 46.0
  • Prices paid rose to 63.5 vs 59.0
  • Backlog of orders fell to 47.0 vs 50.5
  • New export orders unchanged at 52.5 vs 52.5
  • Imports unchanged at 50.0 vs 50.0

Notably, the subcomponents of output and employment have been falling since QE3 ended...

As Markit concludes,

“The survey data indicate that factory output fell in May at its fastest rate since 2009, suggesting that manufacturing is acting as a severe drag on the  economy in the second quarter.

 

Payroll numbers are under pressure as factories worry about slower order book growth, in part linked to falling export demand but also as a result of growing uncertainty surrounding the presidential election.

 

“For those looking for a rebound in the economy after the lacklustre start to the year, the deteriorating trend in manufacturing is not going to provide any comfort.”

Perfect time to be raising rates then?

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