Surveys Suggest US Business Activity Saw Record Surge In June

Surveys Suggest US Business Activity Saw Record Surge In June

Tyler Durden

Mon, 07/06/2020 – 10:04

After US manufacturing surveys soared by a record in June, the services sector surveys were both expected to confirm the re-opening euphoria… with all four surveys beating expectations and rising fast…

ISM Manufacturing in Expansion – 52.6 vs 49.8 expectations and 43.1 prior – best since April 2019
PMI Manufacturing in Contraction – 49.8 vs 49.6 expectations and 39.8 prior – a record 10 point jump
ISM Services in Expansion – 57.1 vs 46.9 expectations and 45.4 prior – record jump
PMI Services in Contraction – 47.9 vs 49.6 expectations and 37.5 prior – record jump

A massive surge in ISM’s Service survey, back to pre-Virus levels…

Source: Bloomberg

The purchasing managers’ measure of service-related business activity, which parallels the ISM’s factory production index, jumped a record 25 points to 66 in June, the second-highest in records dating back to 1997.

Source: Bloomberg

A gauge of new orders climbed nearly 20 points to a four-month high of 61.6.

The record surge in ISM was all driven by optimism (as opposed to real hard data flows):

“Advertisers are starting to place more advertisements and the media business is turning around. Generally, we are at the end of the employee furloughs and layoffs. Our work efforts have been focused on navigating COVID-19. We are now shifting to value-add projects. We are cautiously optimistic, although as we get closer to the presidential election, we are on guard of unprecedented civil and social unrest.” (Information)
“Activity level is holding steady, with the potential of a rebound in the near future.” (Mining)
“Sales have picked up tremendously. Sporadic supply issues. Biggest concern for us is lumber shortages.” (Construction)
“Surprising recovery to sales volume over the past four weeks.” (Agriculture, Forestry, Fishing & Hunting)
“Businesses are starting to reopen and the economy seems to be on the road to recovery, but let’s not get too complacent, [as] COVID-19 is still a pandemic, [and] a vaccine has not been developed. Economics is the reason for the push for businesses to reopen. Utmost care and awareness still needs to be cautiously and religiously followed.” (Accommodation & Food Services)

The ISM’s measure of services employment, however, remains weak and continues to signal job cuts. The gauge advanced to 43.1 in June from 31.8, but is well below a year-ago level of 55.2 as the pandemic continues to upend the labor market across industries.

Now that all the data is in, the IHS Markit Composite PMI Output Index posted 47.9 in June, up significantly from 37.0 in May, and was also higher than the earlier released ‘flash’ figure of 46.8. The slower overall decline in output was linked to the resumption of operations at manufacturers and many service providers.

Commenting on the latest survey results, Chris Williamson, Chief Business Economist at IHS Markit, said:

“June saw a record surge in the PMI’s main gauge of business activity in the US as increasing numbers of companies returned to work and expanded their operations amid the reopening of the economy. The survey points to a strong initial rebound from the low point seen at the height of the pandemic lockdown in April, with indicators of output, demand, exports and employment all showing steep gains. Financial services and technology companies are now reporting improved demand, as are many consumer-facing companies. Many, however, remain constrained by social distancing measures.

“With business confidence in the outlook picking up again in June, a return to growth for the economy in the third quarter looks likely, though this will very much depend on the extent to which demand continues to strengthen. There remains a strong possibility that growth could tail off after the initial rebound due to weak demand and persistent virus containment measures. The need to reintroduce lockdowns to fight off second waves of coronavirus infections will pose a particular threat to recovery momentum, and could drive a return of the recession.”