"Manufacturing Is Far From Booming" - PMI Drops Despite Surge In ISM New Orders

With real spending declining and core durables goods orders and shipments fading, it's perhaps not a surprise that Markit PMI Manufacturing turned lower in Feb to 54.2 (missing expectations) with their chief economist warning "manufacturing is far from booming." Of course, just as with China, ISM provided an opposite perspective on US Manufacturing, beating expectations and rising to Aug 2014 highs.

This largely reflected a moderation in new order growth from January’s 28-month peak, alongside a slightly softer increase in output volumes. Meanwhile, manufacturers reported a sustained rise in inventory levels, which was linked to greater production schedules and expected improvements in client demand.

And stagflation fears should be mounting... as output slows, input prices are soaring...

February data pointed to a robust rate of input price inflation across the manufacturing sector. Although slightly slower than in January, the latest rise in average cost burdens was still one of the fastest recorded over the past two-and-a-half years. Rising prices for raw materials in turn led to another moderate increase in average prices charged by manufacturing companies.

Of course, while PMI missed, ISM beat (just like China data!!) to the highest since 2014 (with new orders at the highest since Dec 2013)

• New orders rose to 65.1 vs 60.4

• Employment fell to 54.2 vs 56.1
• Supplier deliveries rose to 54.8 vs 53.6
• Inventories rose to 51.5 vs 48.5
• Customer inventories fell to 47.5 vs 48.5
• Prices paid fell to 68.0 vs 69.0
• Backlog of orders rose to 57.0 vs 49.5
• New export orders rose to 55.0 vs 54.5
• Imports rose to 54.0 vs 50.0

Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The February survey points to a modest cooling in the rate of expansion of the manufacturing sector, but it remains too early to tell if this is the start of a more prolonged slowdown.

“Even with the latest slowing, the goods-producing sector is still on course for its best quarter for two years, representing a markedly improved picture compared to this time last year.

“Growth is being driven by robust domestic demand, stemming in turn from buoyant consumers and increased investment spending by the energy sector in particular.

“Manufacturing is far from booming, however, as the strong dollar means near-stagnant exports continue to act as a drag on growth.”