US Manufacturing Report Near Standstill: Markit

Markit's U.S. manufacturing sample has come to a near standstill, posting a flash May index of 50.5 that is only barely above breakeven 50 and the lowest reading of the economic cycle. The sample's production is in outright contraction for the first time this cycle while growth in new orders is slowing and inventory inputs are falling. The sample is blaming uncertainty over the general economic outlook for the trouble which is causing customers to delay spending conditions. Order weakness is tied in part to reduced foreign demand with new export sales in contraction for a second month in a row. Backlog orders are down for a fourth month in a row. A positive, however, is continued expansion, though only slight, in payrolls. A positive for the inflation outlook is a rise in input costs though selling prices are flat. Today's report follows weakness in last week's Empire State and Philly Fed reports which are all pointing to continuing softness for a factory sector that has yet to get an export boost from this year's depreciation in the dollar nor a boost in energy investment in line with the bounce back in oil prices.

Recent History Of This Indicator:
The manufacturing PMI, like other leading indicators, has been giving soft signals. The flash for May, at a consensus 51.0, is expected to extend a trend of nearly flat readings. Modest strength in new orders was the biggest plus for April and should help keep the index over the 50 level in May. Export orders have been very weak and manufacturers in the sample have been working down their inventories as much as possible.