The market will digest a trio of potentially important macro data points in the days ahead, and while the most consequential numbers won’t come until the back half of the week, ISM manufacturing serves as an appetizer of sorts.
The headline print for July is a beat at 54.2. Consensus was looking for 53.5. As a reminder, June’s reading marked the first expansion-territory print for the gauge since the onset of the pandemic.
Supplier deliveries (which distorted the headline gauge during the crisis months) appeared to normalize further, in keeping with the trend seen over the past couple of reports.
July’s reading represents the best print since March of 2019. The range from 74 economists was 49 to 57.
New orders rose to 61.5. That’s a big beat and the best reading since September of 2018. The market was looking for just 55.2. The employment gauge remains below 50, which isn’t great.
It’s not clear how much weight anyone is prepared to assign to the numbers given the extremely fluid circumstances around coronavirus outbreaks in several large US states and ongoing discussions around the next virus relief package. Jobless claims and July payrolls are obviously this week’s marquee events.
Meanwhile, IHS Markit’s gauge unexpectedly slipped from the preliminary reading, falling to 50.9 from the 51.3 flash print.
Chris Williamson, Chief Business Economist at IHS Markit, sounded a cautious tone.
“Although indicating the strongest expansion of the manufacturing sector since January, the IHS Markit PMI remains worryingly weak”, he remarked on Monday.
“Much of the recent improvement in output appears to be driven merely by factories restarting work rather than reflecting an upswing in demand”, Williamson added, noting that “growth of new orders remains lackluster and backlogs of work continue to fall, hinting strongly at the build-up of excess capacity”.
Forgive me, but that sounds a bit like what you might expect out of China.
Whatever the case, to the extent ISM manufacturing was a hurdle that needed clearing, consider it cleared.
