US ISM Manufacturing: Outright decline – Wells Fargo
|The ISM Manufacturing report came in below 50.0, showing contraction. According to analysts at Wells Fargo, the report is the latest and so far most undeniable evidence of the rising cost of the trade war and growing stress in manufacturing.
Key Quotes:
“It is no longer simply a matter of “expanding at a slower rate.” We are now talking about outright declines, as the ISM manufacturing index slipped into contraction territory in August for the first time since 2016. More worryingly, the ISM new orders component fell to 47.2, which ties the cycle low set in 2012. In order to find a steeper pace of decline in new orders you need to go back to April 2009, which was during the throes of the recession.”
“Trade remains the most significant issue,” according to the text that accompanied this month’s report. References to the trade war and tariffs are widespread across industries, and the export orders component plumbed a new cycle low of 43.3. In fact, the only time export orders has been lower in the past 30 years—even during recessions—was a seven-month stretch during 2008-2009.”
“Manufacturing employment continues to expand, although the pace of hiring is slower than last year. In a potential warning for this coming Friday’s employment report for August, the employment component of today’s ISM report slipped into contraction territory for the first time in three years.”
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