US manufacturing PMI contracts: Trump failed?

Today, IHS Markit released data from the PMI (Purchasing Managers Index) of US manufacturers for the month of August. The manufacturing PMI reached 49.9 in August, against 50.4 in July. Economists were expecting a reading of the 50.5 PMI.

This reading of the PMI is the lowest recorded since September 2009. A level below 50 indicates a contraction, while a level greater than 50 implies an expansion. According to IHS Markit, "The decline in the overall PMI is mainly due to a much lower contribution from new orders, which offset a stabilization in employment and slightly faster output growth."

US manufacturing PMI at its lowest level in ten years

The latest reading of the manufacturing PMI marked the strongest decline in the order book in ten years. Export sales in August 2019 have also hit their lowest level since August 2009. According to Tim Moore, deputy director of economic affairs at IHS Markit, "the data from the survey of August clearly indicate that economic growth continued to slow in the third quarter. "Manufacturing companies continued to be impacted by the slowdown in global economic conditions, with new export sales falling at the fastest pace since August 2009."

US ISM PMI corroborated the slowdown

The Markit IHS data corroborate the slowdown described by the Institute for Supply Management data for July. The US manufacturing PMI reached 51.2 in July, its lowest level since August 2016. You'll find out more about this in the weak manufacturing PMI index indicates that the US is not in the US. shelter from commercial troubles.

US PMI also declined due to weaker growth forecasts

The PMI services sector index also fell to 50.9 from 53.0 in July. This was also below the economists' expectations of 52.9. This was one of the most worrisome aspects of the latest data, as new business growth slowed to its lowest level in a decade, "driven by a sharp decline in the service sector." In this regard, Moore added: Business spending has been clouded by slowing growth forecasts both nationally and internationally, which has prompted a tighter budget. "

Commercial war and slowdown

The ongoing trade war between the United States and China has remained one of the main reasons for weak corporate capital spending targets. According to S & P Global, spending by US companies is expected to slow to 3% after growing by 11% in 2018.

The trade war between the United States and China is negatively affecting businesses in both countries. US smart stocks are among the most affected by the trade war. Intel (INTC), Qualcomm (QCOM), NVIDIA (NVDA), Broadcom (AVGO) and Micron (MU) are under pressure due to the evolution of Trump's position on Huawei's business relationship with US companies.

The world's PMI in decline

It is not only the United States, the SMIs around the world are in decline. Germany's PMI prints report a contraction in recent months. In Europe, manufacturing output declined for seven consecutive months. China's manufacturing PMI has also been reduced. Its PMI index for July is set at 49.7, marking the third consecutive month of contraction. Read China's PMI Contracts again: The US trade war continues to rage for more information.

The rate curve will reverse again

Today, the much feared indicator of recession, the yield curve, is again reversed. The 10-year US Treasury yield fell below the two-year Treasury yield for the third time in August. On August 14, when this part of the yield curve reversed, it scared the markets. All benchmark indices, including the S & P 500 (SPY), the Dow Jones Industrial Average (DIA) and the Nasdaq Composite (QQQ), closed down more than 3%.

The same thing happened again briefly today, but the markets were much quieter. At 1 pm, HE, SPY, DIA and QQQ were trading with gains or losses of -0.10%, 0.19% and -0.44%, respectively.

Does Trump pay attention to the weaker activities of the factories?

In parallel with concerns about the reversal of the yield curve, the contraction of the manufacturing industry in the United States has heightened market concerns over an impending recession. Protecting and developing the US manufacturing sector has been one of the key promises of President Donald Trump. It seems that he may not be able to keep his promises. In fact, one of the reasons for the current slowdown in economic activity is the ongoing trade war between the United States and China.