US Manufacturing "Slowed To A Crawl" In September As New Orders Hit 9-Month Lows

Despite the weakest new orders in 9 months, Markit US Manufacturing PMI managed a slightly better than expected 51.5 final print for September (still 3mo lows). Ironically, ISM data bounced perfectly to 51.5 also, after tumbling to 49.4 in August. New orders bounced in ISM data as did production, the opposite of PMI data, but as Market concluded, "Manufacturing growth slowed to a crawl in September, suggesting the economy is stuck in a soft-patch." 

Of the 18 manufacturing industries, seven reported growth in September and 11 industries reporting contraction.

Manufacturing output subdued...

September PMI data highlighted that production growth eased to a three-month low, driven by a weaker upturn in new work and greater efforts to streamline stocks of finished goods. The latest increase in new business volumes was the slowest seen so far in 2016. Some survey respondents commented on delays to decision making among clients ahead of the presidential election.

Moreover, there was an additional drag from export sales, with new work from abroad falling fractionally in September, which contrasted with the solid expansion seen in August. Manufacturers noted that the strong dollar continued to exert a negative influence on new export orders.

And rather coincidentally, ISM bounced to perfectly match PMI...


ISM Breakdown:

  • New orders rose to 55.1 vs 49.1
  • Employment rose to 49.7 vs 48.3
  • Supplier deliveries fell to 50.3 vs 50.9
  • Inventories rose to 49.5 vs 49.0
  • Customer inventories rose to 53.0 vs 49.5
  • Prices paid unchanged at 53.0 vs 53.0
  • Backlog of orders rose to 49.5 vs 45.5
  • New export orders fell to 52.0 vs 52.5
  • Imports rose to 49.0 vs 47.0

And respondents details are very mixed...

"Domestic and international sales moving up slightly." (Chemical Products)


"Negotiating prices down on all metals." (Computer & Electronic Products)


"Business is still strong, but we are seeing some pushouts from certain consumer market products." (Primary Metals)


"Sales on the increase and positive outlook for the remainder of 2016." (Fabricated Metal Products)


"Good growing conditions for this year’s corn and soybean crop has the protein market anticipating large supplies and lower cost of goods for 2017." (Food, Beverage & Tobacco Products)


"General business conditions are slowly improving with increased sales and sales leads." (Machinery)


"Furniture sales are increasing." (Furniture & Related Products)


"Some concern about fallout from the Hanjin Shipping bankruptcy. Spending time tracking containers — alternatives. Also, predicated on the impact to worldwide rates, there is some concern around both capacity and ocean rates in the near — to midterm future." (Transportation Equipment)


"Demand increase after previous lackluster month. Some pre-buying activity underway by customers in advance of expected price increases." (Plastics & Rubber Products)


"Oil prices have increased with respect to the first quarter but they remain at low levels affecting our revenue and purchasing power." (Petroleum & Coal Products)

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

“Manufacturing growth slowed to a crawl in September, suggesting the economy is stuck in a soft-patch amid widespread uncertainty in the lead up to the presidential election.


“The survey saw firms pulling back on expanding production and focusing instead on cost-cutting, as inflows of new business slowed to the weakest seen so far this year.


“Any growth is largely being driven by the consumer, in turn helped by tail-winds of low interest rates, low inflation and a solid labour market.


“Business spending, in contrast, is being subdued by the headwinds of uncertainty about the economic outlook, cost-driven inventory reduction and the strong dollar, the latter linked to yet another drop in exports.”

Charts: Bloomberg and Markit


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