A closer look at those manufacturing PMIs


S&P Global’s flash PMIs for June ain’t pretty, and the picture looks no better on either side of the Atlantic.

S&P said US manufacturing purchasing managers’ index — which tracks new orders, output, employment levels, suppliers’ delivery times and materials purchased — fell to 52.4 from 57 in May. Economists expected something closer to 56. Even worse, the pure-play output index sank to 49.6, suggesting a majority of businesses are producing less than they were a month ago . . .

From S&P:

Declines in production and new sales were driven by weak client demand, as inflation, material shortages and delivery delays led some customers to pause or lower their purchases of goods. . .

In line with a renewed fall in backlogs of work, manufacturers expanded their workforce numbers at the softest pace since February. Firms were able to work through their outstanding business as new orders declined

All of which sounds rather bleak, though could help ease longer term inflationary pressures. Renaissance Macro Research is in the camp arguing now isn’t the time to be tightening as aggressively as some at the Fed hope to:

Evelyn Partners’ head of multi-asset funds Ben Seager-Scott broadly agrees, writing in a note that signs of economic moderation ought to allow central banks to “start becoming marginally less hawkish”.

Data out on Thursday from the Kansas City Fed add to the intrigue:

In the eurozone, meanwhile, manufacturing PMI dropped further than expected to a 22-month low.

More from S&P:

New orders for goods and services, meanwhile, are stagnated, failing to rise for the first time since the recovery of demand began in March 2021. Manufacturing led the deterioration, with output falling for the first time in two years.

Although only modest in June, the rate of decline of factory output looks set to accelerate in July given a steepening loss of new orders received during the month. New orders for goods have now fallen for two consecutive months, with June seeing the sharpest decline since May 2020.

Aline Schuiling, economist at ABN Amro, noted that the forward-looking new orders component of the manufacturing PMI fell by 4 points to 44.7, “signalling a sharp drop in orders and further weakness in manufacturing activity in the months ahead”.

France’s manufacturing output index fell a whopping 5.3 points to 45.7, prompting this warning from Joe Hayes, a senior S&P economist: “Output and new orders both declined and for the first time since October last year, serving as a worrying sign for what could be to come for the service sector”.

His colleague Phil Smith had this to say of Germany, where the manufacturing PMI slipped to 52, marking a 23-month low:

“Thanks to a particularly grim outlook for the manufacturing sector, business confidence towards future activity is now at its lowest since the first wave of the pandemic two years ago, and we’re seeing this translate into a broad-based slowdown in job creation as companies start to reassess their staffing needs going forward.”

And it was much the same story in the UK:

A happy PMI day to you, too.

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