US Manufacturing “An Increasing Drag On The Economy” As PMI Drops For First Time Since March

Following a stronger-than-expected Eurozone PMI print this morning, Markit reports a mixed bag for preliminary September US PMIs with Manufacturing limping higher but Services missing expectations and slipping notably. After 5 straight months of gains, the US Composite PMI dropped back below pre-election levels.

As Markit notes, there were signs of underlying fragility in September, with new orders expanding at one of the slowest rates seen over the past year.

Latest data also indicated that new export sales remain close to stagnation.  

Despite the ongoing collapse of ‘hard’ economic data, ‘soft’ surveys continue to remain hopeful…

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

“The US economy showed encouraging resilience in a month of hurricane disruption. Although the September surveys indicated a moderation in growth of business activity, the overall rate of expansion remained robust. Historical comparisons of the PMI with GDP indicate that the surveys point to the economy growing at an annualised rate of just over 2% in the third quarter.

“Similarly, the overall rate of job creation remained solid, historically consistent with non-farm payrolls rising by 180,000 in September.

“The biggest impact of Hurricane Harvey was evident in manufacturing supply chains, where resultant supply shortages were a key driver of higher prices. Supply delays were the most widespread in two and a half years, while input price inflation rose to the highest since 2012.

“The manufacturing sector, which was already struggling in August, consequently acted as an increasing drag on the economy, leaving services as the main growth driver. The survey is consistent with a slight deterioration in comparable official manufacturing output data.

“While repair work in the aftermath of Hurricane Harvey may boost short-term business activity in coming months, a drop in business optimism about the year ahead suggests that companies have become less confident in the longer-term outlook.”