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Order growth has been the slowest since October 2009. The cleanest and dirtiest shirt gets dirtier.
These are just the "Flash" clues of Purchasing Managers (PMI), which are released a week before the last PMIs at the end of the month. They represent only one point of view, but there are large movements, both in the US manufacturing sector and in the US market. services, big movements in the wrong direction, simultaneously, with both sectors now only by a hair still in mode of expansion. The IHS Markit report indicates for both the manufacturing and services sectors that, with disconcerting consequences, the increase in new orders "was the lowest recorded since the start of the series in October 2009." So, one by one.
The manufacturing becomes even weaker:
The IHS Markit Flash Purchasing Managers Index in the US manufacturing sector fell two points from 52.6 in April to 50.6 in May. Above 50, we mean growth. It is still a growth, but it is much slower than a month ago and very close to the zero graph growth line zero (data via Investing.com):
The manufacturing industry has weakened worldwide, with SMIs below 50 in some of the major producing countries. In Germany, he fell into the terrible mid-40s and, therefore, into a steep contraction mode. In this context, the US manufacturing PMI was the cleanest dirty t-shirt, but this advantage fades quickly.
The report:
The underlying data point to a general slowdown in the growth rates of production, employment and pre-production inventories, while new orders decreased for the first time since August 2009.
And new orders are a problem: "New orders have been stalled by reports of weaker aggregate demand conditions and customers' reluctance to place orders. The drop in new business is only marginal, but it marks a clear recovery from the sharp rise recorded in April. The data suggests that demand from domestic and foreign customers declined during the month, as did exports. "
This type of slowdown in the manufacturing sector is "consistent" with an annualized GDP growth of 1.2% in May. But…
"The worst is perhaps to come, as new business inflows have shown the smallest increase on this side of the global financial crisis. Business confidence has fallen to its lowest level since at least 2012, forcing companies to tighten their belts, particularly in terms of recruitment. Employment growth in May was the lowest observed in over two years. "
PMIs are based on surveys of industry leaders without revealing their names and companies. Panelists are asked if certain aspects of their activities increase or decrease over the previous month, such as new orders, new export orders, employment, arrears, inventories, delays in the supply chain, input costs, and so on. the sub-indices. They are asked a general question for the main PMI: "Is your business activity higher, same or lower than a month ago?"
PMIs allow managers to get a snapshot of how their business is affected by changing economic conditions and well ahead of monthly or quarterly data published by companies and governments.
The manufacturing sector has been weak since February, but the PMI survey suggests that "the sector's woes intensified in May and factories will probably weigh more and more heavily on the economy in the second quarter."
"Trade wars have remained at the forefront of manufacturers' concerns, along with signs of slowing sales and weaker economic growth, both in the domestic market and in the major export markets," said the company. 39; investigation.
The services are now also down.
The PMI PMI in the US IHS Markit Flash US business declined 2.1 points from 53.0 in April to 50.9 in May, after a 2.3 point decline compared to previous figures. The first quarter in services had been solid, but the 4.4-point dip recorded in April and May is the biggest decline in two months since March 2016, when the PMI services index went under the bar 50 in contraction mode. May's reading is still in expansion mode, above the red line, but by a mere hair (data via Investing.com):
In the services sector, new orders "increased only slightly, with the growth rate slowing for the third consecutive month, due to lower demand and stiff competition", and delay have contracted.
Employment growth "hit its lowest level in 25 months." The service sector continues to grow, but at a slow pace.
Manufacturing and combined services.
The IHS Markit Flash's composite PMI Output composite index, which includes manufacturing and services PMIs, rose from 53 in April to 50.9 in May, barely in expansion mode. , the slowest growth in overall activity since May 2016, "while a struggling manufacturing economy has been accompanied by a marked slowdown in speed in the service sector. "
Recall that 2016 was the year when GDP grew by a dismal slowdown of 1.6%, the slowest growth since the Great Recession.
"The growth of business activity slowed sharply in May, with concerns over the trade war and growing uncertainty adding an additional blow to order book growth and business confidence," says The report.
Fears are now mounting that the "malaise" in the manufacturing sector is spreading to the service sector, "whose growth dropped in May to one of the weakest since the global financial crisis."
The services sector is the largest component of the US economy and its performance is "a key indicator of strong domestic demand". And this slowdown, which has an impact on services, "puts downside risks on the outlook".
Regarding inflationary pressures and the impact of tariffs on prices, although threatened but mysteriously absent, the report states: "Input price inflation has calmed for the third consecutive month in May, despite persistent comments by panelists. on the impact of tariffs. The slower increase in costs and increased competitive pressures have underpinned a further decline in production costs, the first such decline since February 2016. "
Thus, the outlook for these companies for the next twelve months is deteriorating: "The expectations of companies have fallen to their lowest level since the beginning of the series in July 2012. The reduced confidence was generally attributed to the hesitation of customers and increased uncertainty, often related to global trade. tensions."
The weakness of manufacturing has been well documented. However, according to the IHS-Markit PMI, this sudden deterioration in the services sector, which was still very strong in the first quarter, continued in April and May, is disconcerting.
The Markit PMI IHS Flash is just a view. There are others. The broader non-manufacturing ISM PMI for May has not been released yet, and for April it was still strong, albeit a little weaker than in previous months. Additional second quarter services data will be available in the coming months. And we will see if they confirm that the growth of services is disappearing quickly.
Where are foreign investors in this phenomenon on the US real estate market? Decrease, decline, decline in US home sales despite lower mortgage rates. But mortgage applications are popping up. Which give?
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