Following China's rising (official) and tumbling (Caixin) PMI data overnight, US Manufacturing prints this morning were both weak. PMI modestly disappointed, dropping from July's 52.9 and August's preliminary 52.1 to 52.0 final with new orders and employment sliding. Markit's explanation is simple: "there's anecdotal evidence to suggest that this at least in part reflects a slowing in the economy in the lead up to the presidential election." We guess productivity has been declining for the same reason for the last 9 months? ISM had already rolled over in July, and August's collapse (from 52.6 to a contractionary 49.4) has erased the dead cat bounce hopes of Q2. Across the board, ISM factors deteriorated with new orders plunging.
Dead cat bounce is dead again…
The ISM breakdown…
New Orders plunged… to the lowest sicne Dec 2015
Maunfacturing Employment tumbled…(suggesting another decline in manufacturing payrolls tomorrow)
ISM respondents seem oddly encouraged?
"We have been getting lots of inquiries, but not a lot of sales order placements." (Chemical Products)
"Business was flat this month overall." (Computer & Electronic Products)
"Continued strong market demand for our products related to construction." (Nonmetallic Mineral Products)
"Commercial construction continues to be strong, and therefore our business is very good." (Fabricated Metal Products)
"New product distribution is increasing." (Food, Beverage & Tobacco Products)
"This past month, sales increased over the trend from the first half of the year. There seems to be a general, albeit slight, loosening of capital purse strings." (Machinery)
"Medical device is still strong." (Miscellaneous Manufacturing)
"Business conditions are generally flat." (Transportation Equipment)
"Hard to find production associates. Unemployment in the area is around 4 percent. Can’t get enough employees [which] leads to lots of overtime." (Plastics & Rubber Products)
"Oil prices continue to seek a ‘footing’; rig count slowly increasing." (Petroleum & Coal Products)
Commenting on the final PMI data, Chris Williamson, Chief Economist at Markit said:
“Despite the PMI falling in August, the survey suggests the third quarter is shaping up to be the best quarter so far this year for manufacturing, with output growth picking up compared to the first half of the year on the back of improved export sales.
“The overall rate of expansion remains only modest, however, and the upturn fragile. Weak domestic demand remains a drag on order books. Concerns about the outlook have also resulted in a marked reduction in the rate of job creation.
“There’s anecdotal evidence to suggest that this at least in part reflects a slowing in the economy in the lead up to the presidential election, meaning there’s scope for growth to revive later in the year. In the meantime, the overall sluggish pace of expansion signalled by the survey, and the slacking of inflationary pressures, provides support to those arguing that interest rates should remain on hold.”
Charts: Bloomberg
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