The US economy is in deep trouble, April PMIs out Thursday suggested.
While hardly surprising, the numbers underscore the extent of the malaise, and also the idea that PMI data may have been rendered meaningless by the sheer scope of the downturn. Both the composite and services PMIs out of Europe Thursday suggested there’s little utility in consulting the data. The French services gauge, for example, very nearly printed in single-digit territory.
In the US, the flash read on the IHS Markit services gauge is 27. That’s actually not too far wide of estimates (consensus was 30) and not so low that it renders itself totally useless. Still, a cursory glance at the visual leaves one to question the usefulness of the figures in a scenario where the economy has been totally shuttered.
The flash read on the manufacturing gauge is 36.9, the lowest since March of 2009. Output fell to 29.4, the worst in nearly 13 years. ISM is now doomed to collapse when the new numbers are out early next month.
“The COVID-19 outbreak dealt a blow to the US economy of a ferocity not previously seen in recent history during April”, IHS Chief Economist Chris Williamson said.
Obviously, this doesn’t bode well for GDP, but the subtitle on the visual below speaks for itself.
Williamson emphasizes the indeterminacy of it all. “The deterioration in the flash PMI numbers indicates a rate of contraction exceeding that seen even at the height of the global financial crisis, with jobs also being slashed at a rate far exceeding anything previously recorded by the survey”, he writes.
In addition to the business closures, IHS Markit flags the obvious knock-on impact (in terms of demand) for those firms which have been fortunate enough to stay open for whatever reason.
“Those companies still actively trading reported the steepest drop in demand seen since data were first available, and are also struggling against twin headwinds of staff shortages and supply chain delays”, Williamson said.
It is, in short, an unmitigated disaster. For the first time post-crisis (and maybe even for the first time in the history of the internet), it is literally impossible to overstate the scope of this collapse.
There is no such thing as “hyperbole” anymore.
Literally impossible to overstate the scope of this collapse, and yet the market brushes off PMI nightmares and another 4+ million souls unemployed to grind higher, these are wonderful, terrible times
H – after reading about the vol traders getting ready to lever back up, why don’t the fundamentals matter to them? Just because they aren’t carbon based? Just wondering how to meld the two to give a bigger picture. They just don’t seem to live in the same universe.