There were a few important reports on the U.S. economy released this morning. First, the manufacturing purchasing managers' index (PMI) from IHS Markit ended September at 51.5, the second decline in a row from the 9-month high hit in July. Under the hood, new orders expanded at a weaker pace and inventory drawdowns remained a goal for surveyed managers. Respondents attributed last month’s slowdown in activity to generally subdued client demand, both here in the U.S. and overseas, with new export sales falling for the first time in four months. The rate of job creation picked up from August but surveyed managers appeared to still be cautious with their hiring strategies, at least in the near-future. Markit’s chief economist Chris Williamson, added that “The economy is stuck in a soft-patch amid widespread uncertainty in the lead up to the Presidential election … Business spending is being subdued by the headwinds of uncertainty about the economic outlook, cost-driven inventory reduction and the strong dollar.” More encouraging was the Institute for Supply Management (ISM) manufacturing index, also released this morning, which lifted to 51.5 in September. Measures of new orders, production, employment, inventories, and imports all rebounded last month but comments from surveyed managers were generally mixed.
Finally, data from the U.S. Census Bureau showed that construction spending in America grew at an adjusted annual rate of $1,142.2 billion in August (lagged release). This was a decline of 0.7 percent from July’s downward-revised print and significantly worse than the 0.3 percent gain economists had anticipated. As a result, year-over-year growth in U.S. construction spending collapsed from +1.3 percent in July to -0.3 percent in August, the first annual decline since 2011. Both private and public construction have slowed considerably recently but the latter has seen one of the sharpest declines on record. Overall this was a disappointing report which should result in some downward revisions to analysts’ estimates for third quarter U.S. gross domestic product (GDP) growth.
Sources: Econoday, Twitter, Bloomberg, ZH, IHS Markit, ISM, U.S. Census Bureau, FRBSLPost author: Charles Couch