Not Good News

This morning’s release of the all-important (i.e., closely followed by economists and market players) Institute for Supply Management Manufacturing Survey for August came in below 50 (49.1); denoting contraction (or recessionary conditions).

Of course that’s not good news! And it reflects the deterioration we’ve been seeing (and reporting on herein) in our own macro index. And, yes, as we’ve also been reporting, uncertainty over global trade is the predominant issue.

Here’s from the report:

“…trade remains the most significant issue, indicated by the strong contraction in new export orders. Respondents continued to note supply chain adjustments as a result of moving manufacturing from China. Overall, sentiment this month declined and reached its lowest level in 2019,”

 “Comments from the panel reflect a notable decrease in business confidence. August saw the end of the PMI® expansion that spanned 35 months, with steady expansion softening over the last four months.”

The following is particularly concerning, given that it’s clearly the consumer who’s been doing all of the economy’s heavy lifting of late:

“The Employment Index registered 47.4 percent, a decrease of 4.3 percentage points from the July reading of 51.7 percent.” 

Adding insult to injury, JP Morgan’s Global Manufacturing PMI was also released this morning, and it reads contraction (49.5) as well. 

Here’s Econoday’s commentary:   emphasis mine…

“Slight contraction for the fourth month in a row is the unwelcome signal from the global manufacturing PMI which came in at 49.5 for August. This is the worst run for this index in seven years.

This report offers an anecdotal summation of global trade and the results point to what it describes as “the steepest reduction” in seven years. New export orders show broad declines while total new orders, including for capital goods, mark another seven-year low. Not surprisingly, manufacturing optimism is likewise at a seven-year low.

Over half of the countries tracked in the report are posting sub-50 scores with Germany and the Czech Republic doing the worst. Downturns are also seen in the Eurozone and Japan and though Markit’s PMI for the US held barely over 50, the separate and closely followed US report from the ISM is now, in data released earlier this morning, decidedly under 50 at 49.1.

The trouble for orders is affecting employment which contracted for a fourth month running. Price data in the report are flat.”


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