US Manufacturing Contracts For 3rd Straight Month As Production, Imports Plummet

Following Chicago manufacturing’s survey collapse, September’s plunge in ISM Manufacturing, and October’s weakness in the Services ISM, all hope-filled eyes were on Manufacturing survey data this morning.

• US Manufacturing PMI 51.3, up from 51.1 in September (missed expectations of 51.5)

• US Manufacturing ISM 48.3, up from 47.8 in September (missed expectations of 48.9)

This is the third straight month of contraction (sub-50) for ISM, and this is after a surge in actual economic data in September and collapse in October.

Source: Bloomberg

Under the hood ISM is not pretty:

• Production fell to 46.2 vs 47.3, lowest reading since April 2009

• Imports fell to 45.3 vs 48.1, lowest reading since May 2009   

• New orders rose to 49.1 vs 47.3

• Employment rose to 47.7 vs 46.3

• Supplier deliveries fell to 49.5 vs 51.1

• Inventories rose to 48.9 vs 46.9

• Customer inventories rose to 47.8 vs 45.5

• Prices paid fell to 45.5 vs 49.7

• Backlog of orders fell to 44.1 vs 45.1

• New export orders rose to 50.4 vs 41.0 ?

Chris Williamson, Chief Business Economist at IHS Markit said:

“Tentative signs of renewed vigor are appearing in the US manufacturing sector, with the survey’s production gauge having now risen for three successive months to suggest that the soft patch bottomed out in July. Growth of new orders hit a six-month high, fuelled in part by a renewed increase in exports, prompting producers to take on more staff, with payroll numbers rising at the quickest pace since May.

“The improvement in current conditions was matched by a lifting of business optimism about the year ahead to the highest seen since June. It was also encouraging to see this optimism feed through to an upturn in demand for investment goods, such as plant and machinery, as this hints that firms are moving back into expansion mode, albeit only tentatively so far.

“However, while the outlook has improved, further growth is by no means assured. Survey respondents continue to report widespread concerns over issues such as tariffs, the auto sector’s ongoing malaise, a lack of pricing power amid weak demand and uncertainty about the economic and political situation over the coming year. While the survey data are moving in the right direction, the overall picture therefore remained one of only very modest growth and guarded optimism.”

So who do we believe? ISM or PMI?