US: manufacturing ISM surprises friends and foe
After three consecutive declines, the US manufacturing ISM unexpectedly rose in August. The headline index rose from 55.5 to 56.3, while a significant drop (to 52.8) was expected. The details show a more mixed picture with improvements in produc-tion (59.9 from 57.0), inventories (51.4 from 50.2), employment (60.4 from 58.6) and imports (56.5 from 52.5), while new orders (53.1 from 53.5), backlog of orders (51.5 from 54.5), supplier deliveries (56.6 from 58.3) and new export orders (55.5 from 56.5) dropped. This figure was welcome after the recent bad eco data and comments that were coming in. All uncertainty about the economic outlook has not disappeared, but it seems that the hard landing of manufacturing many predicted is not coming. Manufacturing is moderating, but not falling off the cliff. The manufacturing surveys around the world are confirming that assess-ment. The improvement in the US employment indicator is an encouraging sign for the government, which is considering new measures to stimulate job growth.
The ADP employment report disappointed in August. After increasing in the previ-ous six months, employment fell in August, according to the ADP report. Employ-ment dropped by 10 000 in the private sector, while an increase by 15 000 was ex-pected. Also the previous figure was downwardly revised from 42 000 to 37 000. Looking at the details, employment fell by 6 000 in the manufacturing sector due to a 40 000 decline in the goods-producing part, while employment rose by 30 000 in the service-providing sector. This outcome is a bad signal, coming two days ahead the important payrolls report, and raises expectations that also the BLS report might show a downward surprise in August, with even a decline in private em-ployment not excluded. However the employment sub-index in the ISM points to an eventual better picture, at least in the (small) manufacturing sector.
EMU: manufacturing PMI slightly upwardly revised
The final figure of euro zone manufacturing PMI for the month of August showed a marginal upward revision compared to the first estimate. The headline figure showed an upward adjustment from 55.0 to 55.1, while no revision was expected. National data showed a mixed picture as Greek manufacturing PMI dropped sharply (43.0 from 45.3) due to steep falls in new orders and production. Also Italian manufacturing PMI surprised on the downside of expectations, while Spanish PMI held up reasona-bly well (51.2 from 51.6) and French PMI for the manufacturing sector was upwardly adjusted (from 54.7 to 55.1). After a very strong second quarter, the recovery may slow somewhat in the second halve of the year, although growth is ex-pected to remain on track.
Other:UK manufacturing sector loses momentum in Q3
In the UK, the manufacturing PMI showed a bigger than expected worsening in sentiment. The PMI for the manufacturing sector dropped from a downwardly revised 56.9 to 54.3, while only a slight decline was expected. New orders showed the weakest growth since June 2009 and also output fell back to its lowest level in al-most one year. Manufacturing PMI is now back at its lowest point since November 2009, which indicates that activity is expected to slow down after a strong sec-ond quarter for the UK economy.
