Following disappointment from China last week, and Europe this morning, US PMIs (both manufacturing and services) dropped and disappointed as it appears the lagged impact of China's slumping credit impulse are finally hitting the world's economies. With 'hard' data collapsing to 13 month lows, it is not surprising that 'soft' survey data is finally catching down with Manufacturing at 9-month lows...
# Who could have seen this tumble in 'soft' data coming?
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The economy ended the second quarter on a softer note. The June PMI surveys showed some pay-back after a strong May, indicating the second weakest expansion of business activity since last September.
“The average expansion seen in the second quarter is down on that seen in the first three months of the year, indicating a slowing in the underlying pace of economic growth.
While official GDP data are expected to turn higher in the second quarter after an especially weak start to the year (our recent GDP tracker based on various official and survey data points to 3.0% growth), the relatively subdued PMI readings suggest there are some downside risks to the extent to which GDP will rebound.
“There are signs, however, that growth could pick up again: new orders showed the largest monthly rise since January, business optimism about the year ahead perked up and hiring remained encouragingly resilient. The survey is indicative of non-farm payroll growth of approximately 170,000.
“Average prices charged for goods and services meanwhile showed one of the largest rises in the past two years, pointing to improved pricing power amid healthy demand.”
# So rising prices and tumbling growth, Stagflation looms once again.
Historical comparisons of the PMI against GDP indicates that the PMI is running at a level broadly consistent with the economy growing at a 0.4% quarterly rate (1.5% annualized) in the second quarter, or just over 2% once allowance is made for residual seasonality in the official GDP data...
Not exactly the "shockingly good numbers" that President Trump said we would see in Q2?