PMI Contracts For the First Time Since Oct 2013

The PMI dipped into contraction for the first time over 6 years in this morning's report from Markit.

Markit reports Output Contracts for the First Time Since October 2013.

Key Findings

• Flash U.S. Composite Output Index at 49.6 (53.3 in January). 76-month low.
• Flash U.S. Services Business Activity Index at 49.4 (53.4 in January). 76-month low.
• Flash U.S. Manufacturing PMI at 50.8 (51.9 in January). 6-month low. Flash U.S. Manufacturing Output Index at 50.6 (52.4 in January). 7-month low. Adjusted for seasonal factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 49.6 in February, down from 53.3 in the opening month of 2020. Although only fractional, the decrease in business activity brought to an end a near-four year sequence of expansion following a contraction in service sector output and a slower rise in manufacturing production amid supplier delays following the outbreak of coronavirus. New orders received by private sector firms fell for the first time since data collection began in October 2009.
• Inflationary pressures softened in February. The rate of increase in cost burdens eased to the slowest since last October amid reports of lower demand for inputs. As a result, private sector companies raised their output charges at the softest pace for three months.

Chris Williamson, Chief Business Economist Comments

1. “With the exception of the government-shutdown of 2013, US business activity contracted for the first time since the global financial crisis in February. Weakness was primarily seen in the service sector, where the first drop in activity for four years was reported, but manufacturing production also ground almost to a halt due to a near-stalling of orders.”
2. “Total new orders fell for the first time in over a decade. The deterioration in was in part linked to the coronavirus outbreak, manifesting itself in weakened demand across sectors such as travel and tourism, as well as via falling exports and supply chain disruptions. However, companies also reported increased caution in respect to spending due to worries about a wider economic slowdown and uncertainty ahead of the presidential election later this year.”
3. “The survey data are consistent with GDP growth slowing from just above 2% in January to a crawl of just 0.6% in February. However, the February survey also saw a notable upturn in business sentiment about the year ahead, reflecting widespread optimism that the current slowdown will prove short-lived.”

Yesterday I commented Record Low 30-Year Bond Yield and Record High on Gold Coming Up

And here we are. The 30-year long bond hit a new record low yield this morning of 1.896%.

Gold is up $29 to $1649.

As noted previously, there is Little Chance of Coronavirus Containment in South Korea.

And in China, Half the Population of China, 760 Million, Now Locked Down

From an economic standpoint, January saw the Largest Shipping Decline Since 2009 and That's Before Coronavirus impact hit.

I expect a surprise rate cut at some point. This combination adds fuel for a further rise in the prices of gold.

In case you missed it, Gold at Record High in Euros. A record high in US dollars is also coming up.