US Manufacturing PMI Plunges To 21-Month Lows, Services Slump

Following February's very mixed picture (Services soared, Manufacturing tumbled), PMIs were expected to revert modestly in March (especially following this morning's collapse in German PMI).

However, just like Germany, US Services and Manufacturing PMIs dropped notably more than expected:

  • US Manufacturing PMI prints 52.0, down from 53.0 (and expectations of 53.5) - 21-month low

  • US Services PMI prints 54.8, down from 56.0 (and expectations of 55.5)

Manufacturing PMI continues to track hard data lower...

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

“US businesses reported a softer end to the first quarter, with output growth easing to the second lowest recorded over the last year.

“A gap has opened up between the manufacturing and service sectors, however, with goods-producers and exporters struggling amid a deteriorating external environment and concerns regarding the impact of trade wars. The survey is consistent with the official measure of manufacturing production falling at an increased rate in March and hence acting as a drag on the economy in the first quarter.

At the moment, the service sector appears to be holding up relatively well. But the worry is that manufacturing woes are spreading to service providers, via reduced demand for services such as transport and storage as well as deteriorating business optimism about the outlook – which fell to the lowest for nearly three years in March – and a cooling of the labour market. The survey showed hiring across both manufacturing and services hit the weakest for just under two years in March.

“Price pressures have meanwhile cooled alongside the slowdown. Input prices – a key leading indicator of inflation trends – rose at the slowest rate for two years.”

Williamson concludes:

"The PMI survey data nevertheless remain encouragingly resilient, indicative of the economy growing at an annualised rate in excess of 2% in the first quarter, suggesting some potential upside to many current growth forecasts."