“Near Stalling Of Production” – US Manufacturing Surveys Collapsed In July

The start of the third quarter saw a deterioration in business conditions at US manufacturers as new orders declined for the first time in three months, according to S&P Global.

This makes sense as we have seen ‘hard’ US macro data serially disappoint for three months.

• S&P Global US Manufacturing PMI falls to 49.6 in July, dropping into contraction for the first time since Dec 2023.

• ISM Manufacturing PMI plunged to 46.8 (48.8 exp) – weakest since Nov 2023 (near post-COVID lockdown lows)

Source: Bloomberg

Rubbing some salt in the wounds was the fact that Prices Paid rose while New Orders tumbled and Employment puked (to the lowest since COVID lockdowns)…

Source: Bloomberg

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

“The manufacturing recovery moved into reverse in July, though the gloomier growth picture was accompanied by a marked cooling of inflation in the goods-producing sector.

“Business conditions worsened in July as the first fall in new orders since April caused a near-stalling of production. Purchasing activity is falling and hiring has slowed amid concerns over weaker-than-anticipated sales.”

But William son has an excuse for this downturn…

“Many firms are expecting the weakness to be temporary, linked to paused spending and investment ahead of the Presidential Election. However, firms’ expectations for output in one year’s time remain subdued by historical standards, reflecting additional concerns over the impact of higher interest rates and persistent inflation. While orders for investment goods such as plant and machinery fell especially sharply in July, underscoring the recent pull-back in capital spending, producers of consumer goods also reported a modest fall in demand.

“There was better news on the inflation front. Input cost inflation cooled for a second month after having risen to a 13-month high in May. This welcome lowering of cost pressures helped take further heat out of selling price inflation, which moderated sharply in July to the lowest for a year to signal only a marginal increase in prices during the month. This near-abeyance of producer price inflation should feed through to lower consumer price inflation in the coming months.”

The question is – if the Democrats win, will this downturn accelerate?