PMI Manufacturing Report Shows Early Indications Of Factory Slowing

Early indications of factory slowing in June, likely related to tariffs, are beginning to appear. Yesterday's Philly Fed report slowed to a year-and-a-half low with today's manufacturing PMI falling to a 7-month low at 54.6. The PMI report cites a "clear loss of momentum" with new orders slipping and with export sales at a 2-year low. Production in this sample is also down though the slowing isn't easing congestion in the supply chain as delivery times deteriorated the most in 11 years. A shortage of truckers tied to tighter regulations is cited. Optimism on the outlook is also sinking, down at year-and-a-half lows.

Holding up June's composite, which rose slightly to 56.0, is a bounce higher for the services PMI to 56.5. The service sample reports strength in new orders and jobs as well however as a nearly 5-year high for input costs. The sample cites higher prices for fuel, wages, and also steel-related items. Turning back to manufacturing, steel costs are widely cited and appear to be getting passed through as selling-price traction for the last two months is at a 7-year high.

This report together with Philly offer the first hints of possible tariff effects, and they appear to be negative for growth and also inflationary. The Dallas and Richmond manufacturing reports will be out on Monday and Tuesday of next week respectively and will be closely watched for any new evidence.