“Not Out Of The Woods Yet” – US Manufacturing PMI Stumbles For 2nd Straight Month

Following the better-than-expected (but still in contraction) European PMIs, Markit is expected to show a continued rebound in both Manufacturing and Services for US markets in preliminary January data.

However, while Services did extend its rebound (from 52.8 to 53.2), Manufacturing PMI stumbled for the second month in a row (down from 52.4 to 51.7)…

Source: Bloomberg

As the chart above shows, the last time Manufacturing tumbled against gains in Services, it was the latter than collapsed down and not the former that caught up.

Adjusted for seasonal factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 53.1 in January, up from 52.7 in December, to indicate the quickest rise in output since last March.

Commenting on the flash PMI data, Siân Jones, Economist at IHS Markit, said:

“The recovery of growth momentum across the U.S. private sector continued to quicken at the start of 2020, with overall output rising at the sharpest pace since last March.

Nonetheless, the underlying data highlights a manufacturing sector that is not out of the woods yet, with goods producers seeing only modest gains in output and new orders. Service providers also registered a slower upturn in new business, which fed through to softer increases in output charges as part of efforts to attract new customers.

“On a positive note, private sector firms increased their workforce numbers at a faster rate, with some also expressing frustration at a lack of available candidates to fill vacancies. Job creation reflected stronger optimism regarding future output. Although firms remain wary of the potential for headwinds through 2020, business confidence creeped higher for the second month running.

“Further signs of historically soft price pressures will come as no surprise to the FOMC, who meet next week, adding to expectations of a hold in the policy rate. Muted increases in costs and output charges reportedly stemmed from both producers and suppliers increasing their efforts to boost sales.”