• Manufacturing PMI predicted for a modest rise
  • Trade, global slowdown undermining confidence
  • US economic growth may help restore sentiment

The Institute for Supply Management (ISM) will issue its purchasing managers’ index (PMI) for the manufacturing sector for July on Thursday August 1st at 14:00 GMT, 10:00 EDT

Forecast

The purchasing managers’ index is expected to move to 52.0 in July from 51.7 in June. The prices index will increase to 49.6 from 47.9. The employment index is projected to fall to 53.4 in July from 54.5. The new orders index was 50.0 in June down from 52.7 the prior month.  

US Manufacturing: Two good years

The heady days for the factory sector from mid-2017 to the first quarter of 2019 which saw some of the best sentiment reading in 20 years and the strongest hiring in a generation, have turned circumspect as executives measure the impact of the trade dispute with China, Brexit and other trials of the global economy.

FXStreet

Assumed by most economists to be headed for extinction after losing factories, jobs and revenue for three decades, the unexpected revival in the US manufacturing sector, spurred by the policies of the incoming administration in 2017, reopened plants and brought prosperity back to many small towns across the country.

From January 2017 through June 2019 the economy created 498,000 new factory jobs averaging 16,633 per month. In 2018 the sector saw the most rapid additions to payrolls in two decades.

Reuters

Manufacturing PMI: Frayed confidence

The confidence of the manufacturing sector from the middle of 2017 to the middle of 2018 witnessed the highest sustained PMI averages in a generation. The August 2018 reading of 61.3 was the highest since 2004.  Part of the optimism was likely due to the sudden and somewhat unexpected reversal of fortune in factory production as much as to the improvement in long term prospects. The euphoria couldn’t last.

The trade dispute with China, which initially seemed amenable to quick solution has turned into a grinding confrontation in which each side seems to feel that time will strengthen its hand. Beijing may even be waiting for next year’s US Presidential election.

Trade talks have resumed but expectations for a settlement are much lower than last year.  Washington and Beijing say they are committed to a trade deal, but the demands from each have not moderated.   Businesses must now plan for a prolonged argument with tariffs the new mediator of trade.

Manufacturing confidence slipped sharply in the January government shutdown and has not returned to its pre-closure levels though hiring has retained a greater share of its optimism.  Manufacturing payrolls jumped 17,000 in June after three months of lackluster hiring so it likely that the labor market reflects domestic economic growth despite global concerns.

Reuters

Conclusion

American economic growth decreased in the second quarter to a 2.1% annualized pace in the initial estimate from the Bureau of Economic Analysis, giving the first half a 2.6% run.  The inventory build that bolstered GDP in the first three months was not repeated but improved consumer spending makes a renewal in the third quarter a possibility.  A 5.2% drop in exports subtracted from the final figure and some of that is certainly due to the tariff war with China.

If the US China trade dispute has become the new normal for international trade American manufacturers will gauge how much of their business is affected. That is a different question than measuring sentiment which is unlikely to improve much until there is an agreement.

The US has the world’s largest domestic market.  With steady economic growth and booming job creation American manufacturers may soon take heart from their homegrown good fortune rather than looking overseas for inspiration.  

 

 

 

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD struggles near multi-month low below 0.6500 after Aussie jobs report

AUD/USD struggles near multi-month low below 0.6500 after Aussie jobs report

AUD/USD hangs near its lowest level since August 6 below the 0.6500 level following the release of rather unimpressive Australian employment details for October. Meanwhile, RBA Governor Michele Bullock said earlier on that interest rates were restrictive enough and will not rise any further. 

AUD/USD News
USD/JPY briefly pops 156.00 on firmer US Dollar

USD/JPY briefly pops 156.00 on firmer US Dollar

USD/JPY holds firm near its highest level since July 24, having briefly popped 156.00 in the Asian session on Thursday. The continuation of the Trump trade lifts the US Dollar to yearly highs while Japan's stimulus plans fail to inspire the Yen. Traders watch out for any Japanese internvetion risks.  

USD/JPY News
Gold downside appears unabated, with eyes on Fed Chair Powell

Gold downside appears unabated, with eyes on Fed Chair Powell

Gold price is sitting at its lowest level in two months near $2,560 early Thursday, as buyers eagerly await US Federal Reserve Jerome Powell’s speech for a brief respite.

Gold News
XRP's open interest drops over 10% amid struggles near $0.7440 resistance

XRP's open interest drops over 10% amid struggles near $0.7440 resistance

Ripple's XRP is trading near $0.6900, down nearly 3% on Wednesday, as declining open interest could extend its price correction. However, other on-chain metrics point to a long-term bullish setup.

Read more
Trump vs CPI

Trump vs CPI

US CPI for October was exactly in line with expectations. The headline rate of CPI rose to 2.6% YoY from 2.4% YoY in September. The core rate remained steady at 3.3%. The detail of the report shows that the shelter index rose by 0.4% on the month, which accounted for 50% of the increase in all items on a monthly basis. 

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Majors

Cryptocurrencies

Signatures