Given the extraordinary jumps in several regional Fed surveys, hope was rife that US Manufacturing PMI's flash print would jump... it didn't. Hovering near multi-year lows at 51.4, PMI missed expectations of 51.9 by the most since Aug 2013. With record highs in wholesale inventories, Markit claims that "pre-production inventories decline at the steepest pace in over 2 years." The blame for this plunge: dollar strength, weak global demand, and Trump.
Not recovering...
As Markit explains,
Manufacturers signalled a further reduction in their inventory volumes in March. The latest fall in stocks of finished goods was the fastest since November 2015, while pre-production inventories declined at the steepest pace for over two years.
“US factories continue to endure their worst spell for three and a half years. Headwinds include reduced spending by the struggling energy sector, the strength of the dollar, persistent weak global demand and growing uncertainty caused by the looming presidential election.
“While some comfort might be drawn from the marginal rise in the PMI compared to February, the rate of growth remains worryingly weak and the lack of a stronger rebound is a disappointment, given that many companies reported bad weather to have hit activity in the first two months of the year.
“The persistent weakness seen in March therefore ends a disappointing quarter for manufacturing. When viewed alongside the similar downturn seen in the sister services PMI in February, the survey data are pointing to very modest GDP growth in the first quarter. Hopes are therefore pinned on a rise in Thursday’s Services flash PMI for March to reassure that the economy is not completely stalling.”
Which signals GDP weakness ahead...
“The persistent weakness seen in March therefore ends a disappointing quarter for manufacturing. When viewed alongside the similar downturn seen in the sister services PMI in February, the survey data are pointing to very modest GDP growth in the first quarter. Hopes are therefore pinned on a rise in Thursday’s services flash PMI for March to reassure that the economy is not completely stalling.”
It seems cutbacks are looming as the massive inventory stockpiles are finally forcing reality into manufacturers production.