US Macro Updates
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ISM US Manufacturing PMI
Key takeaway: Manufacturing in the US had seen a little bit of a rebound over the past few months based on various PMI data. That trend took a bit of a breather in October. Headline PMI fell from 49.0 in September to 46.7 in October. The report states that a manufacturing PMI over 48.7, over a period of time, generally indicates an expansion in the overall economy. So after a very short period above this 48.7 mark, the headline PMI was back in a territory that indicates contraction in the overall economy. The New Orders index also decreased from 49.2 in September to 45.5 in October. Similarly, the production index moved lower from 52.5 to 50.4. However, the most important reading in this months PMI was a fairly sharp drop in the Employment Index from 51.2 to 46.8. After about 12-18 months of monetary policy tightening the key focus is now on whether unemployment starts to increase. Any leading indications of a softer employment picture will be of keen importance to market participants.
- ISM Manufacturing PMI at 46.7 in Oct (49.0 in Sep).
2nd Oct 2023
Key takeaway: The key takeaway from the ISM manufacturing PMI data over the past few months has been that while manufacturing continues to be in contraction (like it has been for the past year), the contraction seems to have bottomed out. The headline PMI and most sub indexes have been range bound for the past few months. That idea was further reinforced with the latest September release today. While economic activity in the manufacturing sector contracted for the 11th consecutive month, the manufacturing PMI recorded an improvement over last month, from 47.6 in August to 49.0 in September. The ISM release also made an interesting comment, In their view, a manufacturing PMI over 48.7, over a period of time, generally indicates an expansion in the overall economy. The New Orders index also improved from 46.8 in August to 49.2 in September. The production index moved into expansion territory above 50. And the Prices Paid index moved down from 48.4 in August to 43.8 in September. Overall this was a positive manufacturing PMI report. However, equity markets continued their bearish ongoing sentiment of the past few weeks even after a relatively positive ISM report.
- ISM Manufacturing PMI at 49.0 in Sep (47.6 in Aug).
1st Sep 2023
Key takeaway: The latest August ISM Manufacturing headline PMI was not significantly different from last month’s figure (47.6 in August vs 46.4 in July). The key point to note is that while manufacturing still continues to be in contraction (like it has been for the past year), the contraction seems to have bottomed out. The headline PMI and most sub indexes have been range bound for the past few months. The all important New Order Index continued to be in contractionary territory at 46.8 – 0.5% lower than 47.3 recorded in July. One noteworthy point was the Prices Paid Index climbed up sharply from 42.6 in July to 48.4 in August. This can signify price stability, but any increase in input prices has the potential to translate into downstream inflationary impact. Lastly, the Employment Index had recorded a sharp fall last month – from 48.1 in June to 44.4 in July. This sub index was back up at 48.5 in August. The Employment Index has consistently held up even in the face of other Manufacturing PMI Indexes deteriorating over the past 12 months.
- ISM Manufacturing PMI at 47.6 in Aug (46.4 in Jul).
1st Aug 2023
Key takeaway: The latest July ISM headline PMI moved marginally up to 46.4 from 46.0 in June. The first point to reiterate is that the US manufacturing sector continues to be in contractionary territory. This is the 9th month in a row that ISM Manufacturing PMI has printed below 50. i.e. in contractionary territory. However, similar to the headline PMI number, almost all sub-indexes recorded a slight improvement over the past month but yet were all in contractionary territory. The key New Orders Index came in at 47.3%, 1.7% over last month’s 45.6. The Production Index, Prices Paid Index, Backlog of Orders Index – all recorded a slight improvement from the previous month. However, the most important takeaway from this latest PMI release was the sharp fall in the Employment Index – from 48.1 in June to 44.4 in July. The Employment Index has consistently held up even in the face of other Manufacturing PMI Indexes deteriorating over the past 12 months. We will also get some additional data this Friday (4th Aug) when the latest NFP report is released.
- ISM Manufacturing PMI at 46.4 in Jul (46.0 in Jun).
3rd Jul 2023
Key takeaway: The latest ISM June Manufacturing PMI was interesting and noteworthy to say the least. The first point to reiterate is that the US manufacturing sector continues to be in contractionary territory. This is the 8th month in a row that ISM Manufacturing PMI has printed below 50. i.e. in contractionary territory. The overall story continues to be one of 2 facets – a downdrift in manufacturing and resilience in services. While the overall ISM Manufacturing PMI number had maintained a steady contractionary picture since the start of the year, the S&P manufacturing PMI – in contrast – had shows signs of bottoming in manufacturing activity. However, the recent S&P flash manufacturing PMI broke that trend and now both PMIs are firmly in contractionary territory. The second key point to note was the continued weakness in New Orders (although that sub index improved a bit from 42.6 in May to 45.6 in Jun). Last month, the Production sub-index had registered an increase of 2.2% from 48.9 to 51.1 which probably indicated that manufacturers were working on current orders and fulfilling back logs, while future business remained soft and uncertain. The June Production sub index fell back from 51.1 to 46.7. The third key point to note was that the Prices sub-index had registered a large increase over the past 3 months. That increase had moderated in May coming down from 53.2 to 44.2. In a welcome sign, prices further moderated with the sub index coming down to 41.8 in June. Lastly, employment which has remained the most resilient of all economic indicators, fell in June to a contractionary number of 48.1
- ISM Manufacturing PMI at 46.0 in Jun (46.9 in May).
1st Jun 2023
Key takeaway: The US manufacturing sector continues to be in contractionary territory. This is the 7th month in a row that ISM Manufacturing PMI has printed below 50. i.e. in contractionary territory. However, the overall economic picture has been far more nuanced. Firstly, services PMI has been a complete contrast to manufacturing PMI. i.e. still holding up and mostly in expansion territory. Second, the S&P manufacturing PMI has actually been on an uptrend since the start of the year. The ISM manufacturing PMI data for May was also quite nuanced. New Orders, which are a key metric in PMI surveys, fell 3.1% from 45.7 to 42.6. On the other hand, the Production sub-index registered an increase of 2.2% from 48.9 to 51.1. This could mean manufacturers working on current orders and fulfilling back logs, while future business remains soft and uncertain. The Prices sub-index had registered a large increase over the past 3 months. That increase moderated a bit with the Prices sub index coming down from 53.2 to 44.2. Lastly, employment still remained strong – the sub-index expanding from 50.2 to 51.4.
- ISM Manufacturing PMI at 46.9 in May (47.1 in Apr).
1st May 2023
Key takeaway: The US manufacturing sector continues to be in contractionary territory. However, the ISM manufacturing PMI for April registered a slower pace of manufacturing contraction compared to March. Taken together with the S&P Manufacturing PMI – which has been in a slight upward trend since the start of the year – the slight improvement in the ISM number holds even more significance. 2023 is widely expected to be a recession year. But it has been a slow burn on economic data pointing to a recession. Manufacturing, which accounts for 12% of the US economy, is no different story. The sub-indexes in the April PMI also registered improvements overall. Production improved from 47.8 to 48.9. New Orders improved 1.4 points from 44.3 to 45.7. The Employment sub-index elevated into expansionary territory from 46.9 to 50.2. However, the most notable of them all was the Prices Paid sub-index, which registered a large 4 point gain from 49.2 to 53.2. This increase in the Prices Paid Index has been a feature since the start of the year and can be taken as a leading indicator for upcoming PPI inflation.
- ISM Manufacturing PMI at 47.1 in Apr (46.3 in Mar).
3rd Apr 2023
Key takeaway: The US manufacturing sector continues to be in contractionary territory. After 30 months of continuous expansion, this was the 5th month of ISM Manufacturing PMI contraction in the US. Headline PMI dropped from 47.7 in Feb to 46.3 in Mar. One of the key aspects of the previous month’s PMI data had been the sharp rise in Priced Paid Index from 44.5 to 51.3. This Prices Paid Index moved back down below 50 dropping to 49.2 in Mar. It will be key to watch if the prices data from manufacturing PMI continues its downward trend indicating reducing future CPI pressures. Also new orders fell further sharply into contraction territory from 47.0 to 44.3. Lastly, another key point to note was the Inventories sub index fell from 50.1 to 47.5. Manufacturing inventories which have consistently been higher are gradually coming down (an indication of future impact of inventory on GDP calculations for 2H 2023).
- ISM Manufacturing PMI at 46.3 in Mar (47.7 in Feb).
1st Mar 2023
Key takeaway: It wasn’t a marked change in the US PMI reading for Feb 2023. Headline PMI improved from 47.4 in Jan to 47.7 in Feb. Still in contractionary territory – but a mild improvement in the pace of contraction. After 30 months of continuous expansion, this is the 4th month of ISM PMI contraction in the US. However, the key story for Feb PMI was not in the headline number. It was buried in the Priced Paid Index. Which jumped a huge 6.8% from 44.5 to 51.3. It is even more important to note that January itself was a large jump from December (39.4 to 44.5)! There has been substantial debate amongst economists on the impact of the unusually warm weather in the US in January on the good economic data that came out for the month. However, when you get 2 continuous months of price increases in the PMI – coupled with still elevated PPI inflation – it is hard to discard January numbers as an exception. All eyes to the ISM Services PMI next.
- ISM Manufacturing PMI at 47.7 in Feb (47.4 in Jan).
1st Feb 2023
Key takeaway: Economic activity in the US manufacturing sector contracted in Jan 2023 for the third month in a row. This comes after a period of 28 consecutive months of growth. Manufacturing PMI at 47.4 was lower than last month’s 48.4 and also lower than consensus of 48.0. However, there were a few more key points to note. Most importantly, the Prices sub-index increased from 39.4 in Dec to 44.5 in Jan – a 5-point gain. While the sub-index still indicates decreasing prices, the pace of price decrease was substantially lower according to the survey. According to ISM, a Price Index above 52.9 over time is consistent with an increase in PPI for Intermediate materials. While the index is much below 52.9, it is markedly higher than December. Secondly, the employment sub-index was once again in expansion territory (50.6). The survey indicated companies still willing to hire and looking to retain workforce in anticipation of robust demand. This does not bode well for the labour market tightness story. Lastly, the Imports sub-index also increased to 47.8 in Jan from 45.1 in Dec – indicating improving import volume.
- ISM Manufacturing PMI at 47.4 in Jan (48.4 in Dec).
4th Jan 2023
Key takeaway: One month doesn’t make a trend, but two makes the case a bit more ! The ISM manufacturing index printed in negative (contraction) territory for the second month in a row! Remember this followed after a period of 29 consecutive months of growth. PMIs are very good leading indicators and a continued contraction in manufacturing would suggest growing economic weakness. The most important New Orders Index contracted for the 4th month in a row. Still not as deep as previous recessions – but trending downwards! Almost every other sub index was also in contractionary territory. On the positive front, the prices sub index also continued its downward march The Prices sub index fell sharply from 43.0 to 39.4 – providing further solid evidence of easing price pressures . Lastly, the employment sub index – while softer – still seems to be holding up well (at 51.4). And this data point is also consistent with the overall jobs / employment numbers that we have seen throughout the year.
- ISM Manufacturing PMI at 48.4 in Dec (49.0 in Nov).
1st Dec 2022
Key takeaway: Finally, an ISM manufacturing print that is in contraction territory! After 29 consecutive months of expansion! The ISM PMI Index has been one of the most resilient data points this year that lent credence to a soft landing narrative. That has started to fade away now. The overall index fell from 50.2 to 49.0. New orders contracted for a third month in a row – at 47.2. The Unemployment sub-index which had also held up so far, fell below 50 to 48.4. In line with contracting new orders, backlogs of orders also fell significantly from 45.3 to 40.0. The big upside in this report that continued from October was a decline in the Prices sub-index which fell sharply to 43.0 from 46.6 providing further solid evidence of easing price pressures. Supplier deliveries have also started accelerating indicating improvements in supply chain.
- ISM Manufacturing PMI at 49.0 in Nov (50.2 in Oct).
1st Nov 2022
Key takeaway: The trend lower in ISM Manufacturing continued in October. The overall index fell from 50.9 to 50.2. But importantly the index is still in expansion territory (the 29th consecutive month of growth!). New order contracted similar to September – but they the sub-index at 49.2 was 2.1 points higher than September’s 47.1. The big upside in this report was the Prices sub-index fell sharply to 46.6 from 51.7 providing solid evidence of easing price pressures. Supplier deliveries have also started accelerating indicating improvements in supply chain. Unfortunately, markets yesterday chose to focus on the fact that the headline indicator has not fallen significantly, that it beat expectations and that the employment sub-index is still strong. Combine that with a still massive JOLTs number and you can understand why the S&P fell 1.5% within minutes of these two numbers coming out yesterday morning!
- ISM Manufacturing PMI at 50.2 in Oct (50.9 in Sep).
3rd Oct 2022
Key takeaway: The ISM Manufacturing Report had steadfastly remained solid for the past several months when a lot of other economic and market indicators were indicating recession risks ahead. This ISM report was significantly less than stellar. New orders are contracting again, after having expanded in July. New export orders continued contracting. The Employment Index has returned to contraction. Backlog of Orders index is also approaching contraction. Input prices are expectedly coming off. Finally, the overall index is only marginally in expansion territory.
- ISM Manufacturing PMI at 50.9 in Sep (52.8 in Aug)
1st Sep 2022
Key takeaway: Firstly, once again the ISM Manufacturing PMI differed a bit from the S&P Global PMI. Second, in many ways, this was a stellar report and similar to last month, this once again lends support to a “softer landing” thesis. New orders, one of the most important factor in PMI, expanded again in August, after having declined in July. The surveys still show good hiring and no real indications of layoffs. And finally, input prices have continued their downward trend suggesting easing inflationary pressures.
- ISM Manufacturing PMI at 52.8 in Aug (52.8 in July).
1st Aug 2022
Key takeaway: It may seem a bit repetitive to track both the S&P Global and ISM PMIs. But there is always some good info to screen. On the surface, it seems that the ISM PMI deviates significantly from the S&P Global PMI with the ISM reading still showing manufacturing expansion – for the 26th month in a row. But some of the sub-indices convey a similar message. Most importantly, new orders contracted 2nd month in a row. Raw material prices continue to abate. There are some differences as well. While the ISM employment sub-index is also contractionary, the ISM commentary did not suggest any layoffs or cost cutting initiatives, like the S&P Global PMI. In fact, firms still struggled to fill positions. On the balance though, there is little doubt that US PMIs are trending lower.
- ISM Manufacturing PMI at 52.8 in July (53.0 in Jun).
1st July 2022
Key takeaway: The most important takeaway from the ISM PMI is the contraction in new orders ! In yet another clear sign of slowdown, the New Orders Index fell into contractionary territory and the New Export Orders Index fell further from the previous month. The Prices Index and Employment Index both slowed down in a further indication of abating price pressures and waning labour tightness. Overall the PMI was much worse than consensus estimates. When viewed with the other recent data releases – eg. the fall in real consumption in May and deep downward revisions to consumption data in 1Q, the weakness of the overall economy and the likelihood of another negative GDP print in Q2 seems much more plausible.
- ISM Manufacturing PMI at 53.0 in June (56.1 in May).
1st June 2022
Key takeaway: Similar the the recently released Markit Manufacturing PMI, while a reading above 50 still suggests expansion, the trend is clearly downwards. One interesting point to note was that the survey continued to show that customer inventories are still running low. Which is contrary to some of the recent inventory pile up indications from other statistics. In summary, manufacturing is still looking strong, new orders and new business continues to grow and input prices continue to soar.
- ISM Manufacturing PMI at 56.1 in May (55.4 in April).
The Institute of Supply Management (ISM) Manufacturing Purchasing Managers Index Report on Business is based on data compiled from monthly replies to questions asked of purchasing and supply executives in over 400 industrial companies. The PMI is a composite index based on seasonally adjusted diffusion indices for five indicators with varying weights: New Orders 30%, Production 25%, Employment 20%, Supplier Deliveries 15% and Inventories 10%.