US Manufacturing PMI Slumps To Weakest In 2018 As Prices Surge, Orders Tumble

After China's Manufacturing PMI tumbled to 8mo lows overnight (joining Japan in its demise to 13mo lows), US Manufacturing PMI for July has not been weaker since Dec 2017.

Markit's Manufacturing PMI signals stagflation with output prices at their highest since June 2011, production slide, and supplier delivery times fall to a record low.

And after decoupling from reality in the last two months, ISM Manufacturing tumbled back to 'hard data' at 58.1 (dramatically below expectations)...

ISM's survey suggests prices paid and new orders dropped in July...

ISM New Orders at their weakest since May 2017...

All ISM respondents can talk about is tariffs...

“Global demand is still strong. Working on contingency plans for the Chinese tariffs. We will probably onshore most of that material. Labor availability is becoming an issue.” (Computer & Electronic Products)

“As a result of new tariffs on materials to/from China, we are taking measures to move impacted materials ahead of effective dates, which in some cases is resulting in holding higher inventories.” (Chemical Products)

“Reviewing the business case for importing manufactured parts from China, as new tariffs will lead to increased costs that we will pass along to our domestic customers.” (Transportation Equipment)

“The steel tariffs are a concern to us. We have already seen steel prices increase due to the threat of the tariffs and are seeing kickback from our customers due to the higher prices. We are concerned that the end customer will go to off shore to purchase the finished product.” (Fabricated Metal Products) 

Tariffs are [resulting in] customs inspection-time increases on imported raw materials from China. Logistics seems to be improving, but we are seeing a [continuing] tight chemical bulk tanker market.” (Plastics & Rubber Products)  

"Our customer demand is high, but supply of aluminum is tight. Also, tariffs are negatively affecting our bottom line, as we are unable to pass increases to all of our customers. Plus, we are seeing increases in our construction costs because of the steel price increases. Labor market is extremely tight for professional personnel, plant technicians and support associates.” (Primary Metals)  

"The so-called trade war is now taking its toll on business activity, resulting in substantial reductions to new export orders. China has all but stopped taking orders, causing inventories to build up in the U.S. Domestic business is steady. However, it is too small to carry the load that export markets have retreated from. As a result, we will be meeting as a corporation next week to recast our second-half sales and revenue projections.” (Wood Products)

Chris Williamson, Chief Business Economist at IHS Markit said:

“The US manufacturing sector continued to expand in July, but shows increasing signs of struggling against headwinds of supply shortages, rising prices and deteriorating exports.

"The latest survey showed output rising at a rate roughly equivalent to an annualised 1% pace of expansion, which is the weakest since late last year. While a weakening of new export orders for a second successive month suggested foreign demand has waned compared to earlier in the year, the slowdown can be also in part attributed to increased difficulties in sourcing sufficient quantities of inputs. Suppliers’ delivery delays were more widespread than at any time in the survey’s history. With producers often scrambling to buy enough raw materials, suppliers enjoyed greater pricing power. Not surprisingly, with tariffs also kicking in, cost pressures spiked higher again.

"Some relief for manufacturers came from strong domestic demand, which meant firms were increasingly able to pass higher costs on to customers. Average prices charged for goods consequently rose at the steepest rate for seven years, which is likely to feed through to higher consumer prices in coming months."

Does that sound like a sustainable 4% economy?

Comments

spastic_colon Wed, 08/01/2018 - 10:14 Permalink

"The so-called trade war is now taking its toll on business activity, resulting in substantial reductions to new export orders. China has all but stopped taking orders, causing inventories to build up in the U.S. Domestic business is steady. However, it is too small to carry the load that export markets have retreated from. As a result, we will be meeting as a corporation next week to recast our second-half sales and revenue projections.” (Wood Products)

gee you mean you may have to lower prices??  lumber has been on a tear since 2000........

MuffDiver69 Wed, 08/01/2018 - 10:15 Permalink

Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index at 60 percent or above for the 15th straight month, and the Customers’ Inventories Index remaining low. The Backlog of Orders Index continued to expand, but at lower levels.

Production and employment continues to expand in spite of labor and material shortages. Inputs — expressed as supplier deliveries, inventories and imports — had expansion increases, due primarily to negative supply chain issues, but at easing levels compared to the prior month.

CashMcCall Juggernaut x2 Wed, 08/01/2018 - 14:43 Permalink

Actually Jugger, the Fed has only one purpose and it is NOT to fix interest rates. Fixing prices has never worked. The singular purpose for the fed is to assure dollar liquidity a job they fail repeatedly which a computer could do better. 

Fixing interest rates only creates liquidity perturbations which ultimately trigger recessions. 

Since the Fed's watchful eye over the dollar in 1913, the buying power of the dollar has INTENTIONALLY TUMBLED to the value of one nickle of 1913 buying power. One might assume the Fed's main job is to evaporate the currency. 

In reply to by Juggernaut x2

Herdee Wed, 08/01/2018 - 10:39 Permalink

In order to export from the United States the poor productivity and high costs must compete against more productive labourers around the globe. Even with a tax cut the American economy is in the shitter. Trump can't let go of the old, outdated war machine model while the federal government is devastated by spending that is out of control. The Central Bank ofJapan and the E.U. are currently picking up the liquidity slack by printing in a game of musical chairs between them all. Sooner or later the printing of fiat paper must be directed to the people not the banks. It'll all have to be unleashed into hyperinflation while the federal government is boxed-in by interest rates. A big, dirty rat of government has to escape into hyperinflation in order to make debts look small again. It's the only way out for the modern day Roman Empire out of Washington D.C.

0valueleft Wed, 08/01/2018 - 10:43 Permalink

The SEC has become the equivalent of a magicians assistant, almost as effective as controlling the Fed.

"Use whatever numbers you have to, just keep the tone positive about the economy in general, and we'll leave you be".

MusicIsYou Wed, 08/01/2018 - 10:56 Permalink

Well most people buy things on credit and most people can't scrape together $500 immediately if they need it. It's no wonder manufacturing is dropping.

arrowrod Wed, 08/01/2018 - 11:20 Permalink

Did NYT readers come to this site?  

President Trump has slapped Tariffs on countries that are unfair traders.

The strategy is to punish imports to the U.S., forcing exporters to lower their tariffs against U.S. imports.

China exports $800 billion a year to the U.S.  The U.S. exports $150 billion to China. China won't win a trade war.

In summary (learned this addition in high school), China is going to have to lower tariffs and other trade barriers or the President is going to raise tariffs higher.  Probably from 25% to 50%.  The Chinese will eventually get the message.

FREE TRADE!

CashMcCall arrowrod Wed, 08/01/2018 - 14:32 Permalink

Thanks for the privilege to kick your stupid face in. 

There is no such thing as parody trade. That is not an economic concept. If I make a drug that cures cancer and export it, I create an instant trade deficit with all nations who's people want my medication. Why should I be forced to buy truck tires or some junk just to equal the sales of my drug? If you don't want my drug, then die. I could care less. You pay for my medicine and you get rid of your cancer. That is an even trade in the marketplace. 

As for the US, they trade with 102 nations and have a trade deficit with all of them. Why? Is the US just the big sorry victim as Trump the crybaby claims? Boo hoo hoo. You buy what you want in this world and nobody wants US products, especially GM cars. So what is stopping you fk head from exporting? You don't have what people want and it is not affordable. 102 Nations and you can't get your shit straight with any of them. 

Then we have the US Dollar Reserve and your 800 military bases enforcing US Sanctions if they don't like you and forcing the Dollar reserve down everyone's throat. Who's the globalist retard? The US high dollar policy assures cheap foreign products so the US can live high and mighty off emerging markets and export their slothful inflation. 

Then we look to Hong Kong the greatest Trader in history. No gov regulation, no tariffs, Hong Kong proved that the nation that unilaterally has no Tariffs wins regardless of what any other country lays down in Tariffs. Hong Kong had the most Trade, the highest standard of living, the highest incomes. Even today they have the most expensive real estate in the world. 

One more argument Trumptard. China is the largest importer and exporter in the world. Did you get that? On a global scale that means that China is buying more goods and services than any other country in the world. In Parody Trade shouldn't the US be FORCED into buying just as many goods and services as China from the rest of the world in order to match the global parody? Sure they should. 

But you want me to buy some crummy welfare purchases in equal dollar amount: crummy US tires or crummy chocolate from Hershey... if you buy my cancer drug.

Nope, I will buy my tires from Thailand and my chocolate from Belgium.  Where did you ever come up with such horseshit? Go back and get your GED. 

 

In reply to by arrowrod

Chief Joesph Wed, 08/01/2018 - 11:21 Permalink

The U.S. manufacturing is close to being dead anyway.  Can' hardly make 7% of the GDP.  And the U.S. thinks its going to win a trade war?  No way!!!!

DaveA Wed, 08/01/2018 - 14:28 Permalink

What I want to know is, between tariffs and the CREEPER Act, will the love doll I ordered from Alibaba get through? Because after that arrives, I'll be too busy to read ZH.