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The Institute for
Supply Management’s (ISM) monthly opinion survey showed that growth of economic
activity in the U.S. manufacturing sector decelerated again in August, to its
slowest rate since May 2013. The PMI
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Wood
Products was unchanged in August. "Business is guarded but steady. Margins
are tight. Markets are very competitive. China is lackluster," wrote one Wood
Products respondent. Paper Products expanded as usual, with broad-based support
among the sub-indexes. "We are oversold," observed one Paper Products
respondent, however.
The
pace of growth in the non-manufacturing sector -- which accounts for 80% of the
economy and 90% of employment -- eased slightly off its July high. The NMI registered
59.0%, 1.3 percentage points lower than the July reading of 60.3%. Here, too, the
sub-indexes were mostly lower.
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Two
of the three service industries we track (Real Estate and Construction)
reported expansion in August. Ag & Forestry was unchanged.
No
relevant commodity was consistently up in price. Some respondents reported
paying more for diesel and gasoline, others less. Only crude oil was
consistently lower in price. No relevant commodity was in short supply.
ISM’s
and Markit’s
manufacturing surveys were consistent insofar as both reported a loss of momentum.
The services/non-manufacturing reports diverged somewhat, however, as ISM’s NMI
decreased while Markit’s Services PMI increased.
Comments
on Markit’s reports are presented below:
Manufacturing -- “August’s survey highlights that the U.S.
manufacturing sector continues to struggle under the weight of the strong
dollar and heightened global economic uncertainty,” said Tim Moore, senior
economist, “but resilient domestic spending and subdued cost pressures are
keeping the recovery on track. Reflecting this, new orders from abroad have now
fallen in four of the past five months, which represents the weakest phase of
manufacturing export performance since late-2012.
“In
response to softer growth momentum, manufacturers took a more cautious approach
to staff hiring and inventories in August. Stocks of finished goods were
depleted for the first time in 2015 so far, and job creation was the weakest
for over a year, as some firms sought to realign production schedules with
expectations of sluggish growth trends ahead.”
Services -- “The US economy is enjoying a solid third quarter,” said Chris Williamson, chief economist, “with robust survey readings so far pointing
to 2.5% annualized GDP growth. Employment growth is also holding up well, with
PMI surveys signaling another month of non-farm payroll growth in excess of
200,000 in August.
“Although
the manufacturing sector has been struggling in the face of weak overseas
demand and the stronger dollar, the more domestically-focused service sector
clearly continues to fare well amid these headwinds and, due its size, is
keeping the economy ticking along at a reasonable, albeit unspectacular, rate.
It’s also reassuring to see business expectations about the year ahead rebound
from the brief lull seen in July.
“However,
while the economy has maintained robust growth momentum, inflationary pressures
have abated, which will help the argument that interest rate hikes can be
delayed. In fact, with the survey data showing average selling prices for goods
and services to have fallen in August for the first time since 2010 and global
economic concerns intensifying, the balance could easily tip towards the need
for more stimulus.”
The foregoing comments represent the
general economic views and analysis of Delphi Advisors, and are provided solely
for the purpose of information, instruction and discourse. They do not
constitute a solicitation or recommendation regarding any investment.
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