“Weakness Looks Broad-Based” – US Manufacturing Survey Hits 6-Month Highs (Or 3-Month Lows)

Just like with China’s “surprising” PMI beat, it is hard to know if the respondents for this morning’s US manufacturing surveys were interviewed before or since the coronavirus pandemic has collapsed global supply chains.

• Markit’s Manufacturing PMI beat expectations, printing 51.9 vs 51.7 exp, but fell to 3-month lows.

• ISM’s Manufacturing survey smashed expectations, surging back into expansion at 50.9 – highest in 6 months.

So you decide which you believe…

Source: Bloomberg

Under the hood, PMI was broadly positive…

• Production rose to 54.3 vs 44.8; highest index since April

• New orders rose to 52 vs 47.6; best measure since May

• Employment rose to 46.6 vs 45.2

• Supplier deliveries fell to 52.9 vs 54.6

• Inventories fell to 48.8 vs 49.2

• Customer inventories rose to 43.8 vs 41.1

• Prices paid rose to 53.3 vs 51.7

• Backlog of orders rose to 45.7 vs 43.3

• New export orders rose to 53.3 vs 47.3

• Imports rose to 51.3 vs 48.8

For context this is the biggest MoM jump in ISM since July 2013 – does that make any sense to you?

But, PMI was not, as Chris Williamson, Chief Business Economist at IHS Markit said:

“US manufacturing limped into 2020, with falling exports dampening output growth and causing a pull-back in hiring. The survey data are consistent with factory production falling moderately, meaning the manufacturing sector looks set to act as a drag on the overall economy once again in the first quarter.

“Weakness looks broad-based. Rising demand from households has helped support production in recent months, but January saw a marked slowing in new orders for consumer goods. Production of capital goods such as business equipment, plant and machinery meanwhile fell for the first time in almost four years, hinting at weakened business investment.

“More encouragingly, business expectations for the year ahead perked up, coinciding with an easing of trade tensions and the signing of new North American and Chinese trade deals. Companies are therefore expecting the soft patch to be short-lived, though fears surrounding the Wuhan coronavirus and any further potential escalation of trade tensions could erode this optimism.”

So it seems like a global pandemic is great for US manufacturing!!!! We suspect ISM will see one of its biggest drops in Feb after the hopes of the trade deal crash on the shores of coronavirus.