US Manufacturing Slumps To Weakest Since 2020 As Cost Inflation Hits Record High

October and November have seen US macro-economic data surprise to the upside (admittedly from a depressingly low level overshoot), and flash PMI signaled an uptick in Manufacturing earlier in the month, but that was the end of the good news.

• Markit US Manufacturing was a big disappointment, tumbling from 59.1 earlier in the month to 58.3 final for November, which is below October’s final 58.4 – the weakest print since Dec 2020.

• ISM US Manufacturing also disappointed, though only modestly, printing 61.1 vs 61.2 exp, but up from October’s 60.8.

So Markit worst since 2020, and ISM best since March…

Source: Bloomberg

Markit warns that longer lead times, supplier shortages and higher energy prices meanwhile pushed the rate of cost inflation to a fresh series high.

ISM, on the other hand saw prices drop?!

Which is odd…

Chris Williamson, Chief Business Economist at IHS Markit said:

“Broad swathes of US manufacturing remain hamstrung by supply chain bottlenecks and difficulties filling staff vacancies. Although November brought some signs of supply chain problems easing slightly to the lowest recorded for six months, widespread shortages of inputs meant production growth was again severely constrained to the extent that the survey is so far consistent with manufacturing acting as a drag on the economy during the fourth quarter.

“While demand remains firm, November brought signs of new orders growth cooling to the lowest so far this year, linked to shortages limiting scope to boost sales and signs of push-back from customers as prices continued to rise sharply during the month.

“While average selling price inflation eased as firms sought to win customers, the rate of input cost inflation hit a new high, hinting at a squeeze on margins.”

So, is it any wonder that the yield curve is collapsing in fear of an imminent policy error by The Fed – tightening into a slowdown.