Macro Flash Report

S&P Global US Manufacturing PMI

Takeaway: Over the last couple of months, the S&P Global and ISM Manufacturing PMIs have been on opposite sides of the contraction / expansion threshold, providing a mixed view of overall manufacturing activity. This morning’s worse than expected preliminary release of July data for the S&P Global Manufacturing PMI underscores the fact that the much-anticipated recovery in the manufacturing sector continues to be pushed back, possibly not until after the interest rate cutting cycle begins.

S&P Global US Manufacturing PMI

The July preliminary S&P Global US Manufacturing PMI dropped unexpectedly to 49.5, down from 51.6 in June, and below the forecast of 51.7. This marks the lowest reading of the year, the first contractionary reading in 7 months, indicating worsening conditions in the manufacturing sector.

Production and inventories declined, as well as new orders, which dropped especially sharply.
Employment growth also slowed, while supplier delivery times lengthened slightly, but only marginally.
On the pricing front, prices charged rose by the smallest in a year, yet input prices increased more quickly, the sharpest in 4 months, due to higher costs for raw materials, energy, and logistics.
Despite these challenges, future sentiment improved from June’s 19-month low, buoyed by capacity expansion and anticipated demand growth, especially after the upcoming election.

Conversely, the preliminary S&P Global US Services PMI rose to 56, the highest in 28 months, up from 55.3 in June and exceeding market expectations of 55. This marks the fourth consecutive month of outperforming the manufacturing sector and drove the S&P Global US Composite PMI to increase to 55 from June’s 54.8, hitting the highest level since April 2022 and continuing 18 straight months of growth.

However, unlike manufacturing, future sentiment slipped, with concerns over uncertainty regarding the election, as well as inflation and interest rates being more evident.