Both the ISM and PMI manufacturing surveys ticked up slightly in June but the rest of the economic results today left little to cheer about.

Let’s take a look at both surveys starting with ISM.

ISM 2016-07-02

The ISM bounced from last month’s 51.3 and a Bloomberg Econoday Consensus of 51.5 to 53.2.


ISM’s sample is reporting significant acceleration to a level that is still, however, no more than moderate. The index easily beat expectations, at 53.2 in June and the best reading since February last year. New orders are especially solid, at 57.0 for a 1.3 point gain and the best reading since March. And export orders are keeping up, 1.0 point higher at 53.5 for the 4th straight plus-50 showing. Production is active, inventories may be on the climb, but employment is flat. A negative for profits but a plus for the inflation outlook is continued pressure in raw material costs. New orders are very closely watched in this report and the strength will lift expectations for June’s factory data.

Markit US Manufacturing PMI

Key Points

  • Renewed rise in production volumes
  • Sharpest increase in new business since March
  • Moderate expansion of payroll numbers

Markit Manufacturing PMI June Final

Markit 2016-07-01

Markit Summary

“U.S. manufacturers indicated a slight rebound in production volumes during June, helped by the fastest rise in new work since March. However, the latest survey signalled that growth momentum remained relatively subdued in comparison to its post-crisis trend, which contributed to cautious job hiring and further efforts to reduce inventories in June.”

Comments from Markit Top Economist Chris Williamson

  • Although the manufacturing PMI ticked higher in June, the latest reading rounds off the worst quarter for goods producers for six years.
  • The lacklustre performance of the manufacturing economy adds to signs from the flash services PMI surveys that the underlying pace of economic growth in the second quarter remain after a disappointing start to the year.
  • The upturn in the employment index suggests that firms may be expecting the recent bout of weak demand to be temporary, though hiring clearly remains subdued amid fragile business confidence.
  • Producers are struggling in the face of the strong dollar, the energy sector decline and presidential election jitters. With companies craving certainty, heightened tensions between the UK and the European Union are likely to unsettle the global business environment further in coming months, and therefore risk dampening growth in the US and export markets.
  • The data flow in the next two months will therefore be critical to policymakers in gauging the appropriate outlook for interest rates.

In light of other data, and recent global events including Brexit, it takes quite a bit of imagination to believe manufacturing has turned the corner in the US.

Mike “Mish” Shedlock