US manufacturing PMI at 28-month low; Services shrink with strong declines – Mish Talk | So Good News
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Consider the S&P Global Flash US Composite PMI™.
Key findings
- Flash US PMI Composite Output Index at 47.3 (September: 49.5). 2 months less.
- The US Services Business Activity Index flashed to 46.6 (September: 49.3). 2 months less.
- US Manufacturing Output Index at 50.7 (September: 50.6), 5-month Fri Flash.
- Flash 28-month low in US Manufacturing PMI at 49.9 (September: 52.0).
According to S&P Global’s latest ‘flash’ PMI™ data, private sector companies in the US recorded a contraction in output at the start of the fourth quarter. The decline in activity was firmer and stronger than seen in September, as carriers signaled a faster decline. Manufacturers, on the other hand, saw production rise for the second month, albeit marginally.
Headline Flash The US PMI Composite Output Index registered 47.3 in October, down from 49.5 in September. The rate of decline is the second-fastest since 2009, excluding the initial pandemic period.
New orders returned to contraction territory in October. The decline in new business was modest but broad-based as manufacturers and service providers recorded weaker client demand. Commodity producers fell earlier this year, stressing the impact of inflation and stock-building, as customers are currently spending on inputs and semi-finished goods. Declining foreign customer demand is weighing on new export orders due to a strong dollar and challenging economic conditions in key export markets. Foreign new business fell sharply, the fastest decline since May 2020..
S&P Global Flash US Services PMI™
The S&P Global Flash US Services Business Activity Index posted 46.6 in October, down from 49.3 in September, indicating a sharp decline in services sector output. The latest data signaled the second-fastest decline in business activity in nearly two and a half years. Companies have linked the decline to weak consumer demand and the impact of inflation and higher interest rates. At the same time, New business activity fell for the second time in the past three months, but only marginally overall. Weighing down on total new sales was a drop in demand from foreign customers. Inflationary pressures in key export markets led to a sharp decline in new export orders.
Chris Williamson, Chief Economist at S&P Global Markets;
- “The US recession gathered significant momentum in October, and confidence in the outlook has also weakened significantly. The decline is due to a decline in service industries as the cost of living rises and financial conditions tighten. Manufacturing remains more resilient at the moment, but October saw a sharp drop in demand for goods, with current output being maintained only by companies eating into the backlog of previously placed orders. This clearly shows the unsustainability of the demand revival, and it would not be surprising to see companies cut back sharply on their input purchases to prepare for lower output in the coming months.
- “A side effect of this decline in input purchases is the easing of supply constraints and a stronger dollar, which has cooled price pressures in the manufacturing sector.
- “Food, Higher energy and labor costs, as well as rising borrowing costs, have slightly increased price pressures in the services sector, but increased competition has caused average prices charged for services to rise at a fractionally faster rate. Evidence is mounting that consumer price inflation should cool in the coming months as price pressures ease in the goods-producing sector.
- “Surveys therefore paint a picture of an economy with an increasing risk of contraction in the fourth quarter at a time when inflationary pressures remain stubbornly high. However, there are clear signs that weak demand is helping to keep headline inflation down to moderate levels, especially if interest rates continue to rise, which should continue to ease in the coming months.”
Main ideas
Inflation is mild, but the costs are regressive.
Export orders were weak in both goods and services. Companies are now working together on the sustainability of backpacks.
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This does not seem to match the rise in trade in GDPNow.
For discussion, See GDPNow Creator Pat Higgins’ October rise in GDP estimates.
Nor is it alleged that China’s exports have risen to match the increase in exports to the US. China’s trade surplus for the first nine quarters of 2022 was 49% higher than the same period last year, a record trade surplus.
For a discussion of China’s exports, China’s GDP beat expectations but retail sales were weak again.
Regarding the discrepancies, a reader asked whether LNG and soybean exports and/or the GDPNow model were calculating more than actually existed.
However, it is true that the global economy is slowing down. Those who wish Hopeful No matter what real estate agents and President Biden say, the US is not out of recession.
This post originated from MishTalk.Com.
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