Gauges of business activity in America continue to send mixed signals. For example, industrial production cooled in January and demand for U.S.-manufactured durable goods softened. Incoming survey data have also disappointed expectations and suggest that little improvement in factory output occurred last month. The Institute for Supply Management’s headline U.S. manufacturing index, for instance, declined in February to 54.2, the weakest reading in over two years, and IHS Markit’s manufacturing purchasing managers index (PMI) slid to 53.0, an 18-month low. Both gauges, though, remain above 50, which implies that activity is expanding rather than contracting.
Further, comments from surveyed manufacturers were generally optimistic and suggest that overall business is still solid, just down from the near-record levels seen earlier last year. Most of the complaints from managers in February were again focused on political uncertainty and tariffs, so any progress in the trade negotiations between the United States and China in subsequent months will likely provide a needed stimulus. However, in the near-term the two surveys showed that manufacturing hiring has clearly moderated. This could prove to have been a noticeable drag on job creation in America when the big February nonfarm payrolls report from the Bureau of Labor Statistics is released later this week. Certain measures of activity in the larger U.S. services sector out this morning also came in worse than anticipated, which again adds to the case that hiring in America last month likely slowed following January’s above-trend gain.
Sources: Econoday, IHS Markit, ISM, Wells Fargo, FRBSL
Post author: Charles Couch