Manufacturing Sample Reports Continue To Slow

Markit's US manufacturing sample has been moving steadily from slowing conditions to nearly stagnant conditions. At 50.4, the final manufacturing index is a marginal improvement from 50.0 in the mid-month flash and basically in line with 50.6 in final June.

New orders did improve in July but remain weak with respondents citing issues in the auto sector and the ongoing impact of tariffs that, the report says, is leading to hesitancy in placing orders. Export orders are down for a second time in three months. Unlike many other reports where confidence has been firm, year-ahead production expectations in this report are down again and at a low for this question which goes back seven years.

The lack of confidence is affecting staffing levels which for this sample posted their first reduction in six years. Production moved forward last month but at the expense of backlogs which edged lower. Price indications are mixed with inputs at a 2-year low but selling prices rising at a solid rate.

...meanwhile...

Extending a straight slope down, ISM's index fell 5 tenths in July to a lower-than-expected 51.2 to indicate only slight monthly growth in composite activity. After a peak of 60.8 in August, this index and has been trending lower and signaling one of the very most closely watched warnings on the health of the US manufacturing sector.

First the positive and that's marginal improvement in new orders which rose 8 tenths to a still very soft 50.8. Now the run of negatives including an abrupt 3.3 point slowing in production growth to 50.8 and a 2.8 point slowing in employment now at 51.7. The report's prices paid index has been a prominent negative, down 2.8 points to a sub-50 level of 45.1 to indicate monthly contraction in raw material prices and the steepest contraction in 3-1/2 years.

This report, together with very similar results from the manufacturing PMI sample released earlier this morning, do support the Federal Reserve's concerns over manufacturing and specifically confirm Jerome Powell's remarks at yesterday's press conference that business contacts in the manufacturing sector, citing global slowing and tariff effects, are reporting trouble.