The US ISM Manufacturing PMI ticked up marginally today indicating slightly stronger manufacturing activity. The change was small from 50.8 to 51.3. While output and new order indicators fell, employment remained the same and inventories declined slightly, supplier deliveries slowed at the fastest pace for some time. The month on month change in supplier deliveries was 10.2%, only bettered on 5 occasions over the last 35 years.
But supplier deliveries tend to lag new orders and we also know that new manufacturing orders fell significantly in late 2015 and have since bounced back (data in the chart below is to March 2016).
The bounce in supplier deliveries look to be related to the bounce back in PMI new order indicator starting in late 2015 and we can see this lag here:
The bounce in new order data was also the strongest since the recession ended and is usually associated with cyclical turning points.
But, with the continued slowdown in global manufacturing PMIs and weakness in the ISM’s other PMI components as well as weakness in readings from Markit’s own indicator I would not be too upbeat about any possible signal. We appear to be stuck in a slowing growth trend market by downs and gradually weakening ups!
And from Markit’s own PMI release:
“The survey data indicate that factory output fell in May at its fastest rate since 2009, suggesting that manufacturing is acting as a severe drag on the Page 2 of 3 © Markit economy in the second quarter. Payroll numbers are under pressure as factories worry about slower order book growth, in part linked to falling export demand but also as a result of growing uncertainty surrounding the presidential election