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This article first appeared in the Morning Brief. Get the Morning Brief delivered straight to your inbox Monday through Friday before 6:30 a.m. ET. Subscribe
Thursday, September 2, 2021
Demand pressures continue throughout the summer
For months, Morning Brief readers have been reminded over and over again that the economy is not suffering from a demand problem.
And there is nothing in recent data to suggest that this trend is abating, even as the Delta variant of COVID-19 continues to march across the world.
As happens at the start of each month, the Institute for Supply Management (ISM) and IHS Markit have each published readings on manufacturing activity for the previous month. And in both reports, we saw that the sector continued a robust expansion in August.
“IHS Markit’s August PMI data signaled a marked improvement in the health of the US manufacturing sector,” the firm said in its report, released Wednesday. “Although slightly weaker than that seen in July, the expansion was supported by strong increases in production and new orders.”
The Purchasing Managers Index, or PMI, recorded a reading of 61.1 in August, a four-month low for the series, but still among the strongest this index has seen in the past 14 years. Any reading above 50 indicates that the manufacturing sector is expanding; readings below 50 indicate a contraction.
In the ISM report, Tim Fiore, chairman of the Institute’s Manufacturing Firms Inquiry Committee, said that “panelists reported that their companies and suppliers continue to struggle at unprecedented levels to respond to increasing demand “. The ISM PMI index reached 59.9 in August, down from 59.5 in July.
“All segments of the manufacturing economy are affected by record raw material supply times, continued shortages of critical raw materials, rising raw material prices and product transportation difficulties,” added Fiore. . However, he also noted that familiar themes – particularly a labor shortage and persistent global bottlenecks – converge with the relentless pandemic.
New outbreaks of COVID-19 add to pandemic issues – worker absenteeism, short-term closures due to parts shortages, difficulties filling vacancies and overseas supply chain issues – which continue to limit the growth potential of manufacturing. However, the optimistic sentiment of the panel remained strong, with eight positive comments for each cautious comment, ”added Fiore.
So while the past few weeks have brought us a mixed set of consumer health data, as expectations for Friday’s jobs report are more modest gains in August, which the production side of the economy continues to signal is that this expansion remains very much alive.
The current environment is flawed – supply chain pressures, labor and material shortages, and higher costs remain volatile inputs for producers trying to manage forward order books. But order books remain full and growing.
Or, as Fiore said on Wednesday, “demand remains at high levels, despite rising prices for almost everything.”
Through Myles abroad, journalist and presenter for Yahoo Finance Live. Follow him on @MylesUdland
What to watch today
Economy
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7:30 am ET: Challenger job cuts, year-on-year, August (-92.8% in July)
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8:30 am ET: Initial jobless claims, week ended August 28 (345,000 expected, 353,000 during the previous week)
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8:30 am ET: Continuing complaints, week ended August 21 (2,808 expected, 2,862 million in the previous week)
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8:30 am ET: Unit labor costs, Final 2Q (0.9% expected, 1.0% in the previous print)
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8:30 am ET: Trade balance, July (-70.9 billion dollars expected, -75.7 billion dollars in June)
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10:00 am ET: Factory orders, July (0.3% expected, 1.5% in June)
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10:00 am ET: Durable goods orders, July final (-0.1% expected, -0.1% in the previous print)
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10:00 am ET: Orders of non-military capital goods, excluding aircraft, final July (0.0% in previous impression)
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10:00 am ET: Non-military capital goods shipments, excluding aircraft, July final (1.0% in previous impression)
Earnings
Pre-marketing
Post market
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4:05 p.m. ET: DocuSign (DOCU) Expected to Report Adjusted Earnings of 39 cents per Share on Revenue of $ 485.53 Million
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4:05 p.m. ET: MongoDB (BMD) Expected to Report Adjusted Losses of 40 cents per Share on Revenue of $ 184.00 Million
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4:15 p.m. ET: Broadcom (AVGO) Expected to Report Adjusted Earnings of $ 6.85 per Share on Revenue of $ 6.76 Billion
Politics
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Two committees in the United States House of Representatives – Natural resources and Monitoring –Will be the first on Capitol Hill to officially “mark” his share of the Democrats’ $ 3.5 trillion Build Back Better Act. All relevant House committees will present their proposals in the coming weeks, which will then be combined and finalized by Speaker of the House Nancy Pelosi and other seasoned lawmakers. Next week, the Tax Editorial Board will be looking at major tax increases.
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Pelosi will be in Texas today, holding a press conference in Austin at 2:30 p.m. CT to outline his healthcare priorities for the Build Back Better Act.
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President Biden has meetings at the White House today before a trip to Louisiana to see the damage from Hurricane Ida. At 11 a.m. ET today, Biden will deliver a speech on his administration’s response to the storm.
Top news
Apple will let media apps avoid 30% fee after close scrutiny [Bloomberg]
Judge Conditionally Approves Purdue Pharma Opioid Settlement [Bloomberg]
China orders Meituan, Didi to rectify fault by year-end [Bloomberg]
US Aviation Agency investigates Branson Virgin Galactic flight hijacking [Reuters]
Yahoo Finance Highlights
AMC stock deserves to collapse to 87%: analyst
Nabisco employee calls for boycott of company snacks on strike
The curse of disorderly endings
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