Stagflation Strikes Again As Manufacturing Sector Slumps To Post-Trump Lows

Confirming the weakness in the preliminary print (and on the heels of China’s major disappointment), Markit’s US manufacturing PMI tumbled in April to its lowest since September 2016. ISM’s Manufacturing Survey confirmed PMI’s for once and collapsed from 64.5 to 57.5. Worse still, stagflationary pressures remain as new orders and output slump, input prices are rising at their fastest rate since Sept 2014.

Slower growth of total new work contributed to the weakest upturn in purchasing activity across the manufacturing sector since September 2016. Manufacturers also sought to reduce their inventory holdings, with stocks of purchases falling slightly for the first time in seven months. In contrast, post-production inventories increased at a modest pace in April. The latest survey signalled that the rate of expansion nonetheless eased to its weakest for seven months. New order growth also moderated to its slowest since September 2016, which survey respondents mainly linked to more cautious spending among domestic clients.

Having tracked stocks for months post-Trump, it appears the respondents in the ISM survey finally gave up hope.

Employment slumped in the ISM survey…

But it was new orders that took the biggest hit…

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

“Manufacturers reported that growth of production and order books have slowed markedly since peaking in January, with April seeing the weakest improvements for seven months.

“The signs of slowing growth are most evident in the domestic consumer sector, but investment goods manufacturers continue to fare well, enjoying stronger capital equipment spending from the energy sector in particular. Exports have also perked up, with April seeing the steepest increase in foreign orders for eight months.

“Price pressures have meanwhile risen to a two-and-a-half year high, which is likely to feed through to final prices paid for goods consumers in coming months.

“A more upbeat picture came from hiring, which picked up in April, as did optimism about business conditions in the year ahead, suggesting firms are expecting order books continuing to improve in coming months.”

The ‘soft’ data is collapsing back to reality (near 3-month lows)…