The first of this week’s top-tier US data missed estimates, perhaps helping to make the “peak growth” case, even as it’s clear the world’s largest economy is still firing on most, if not all, cylinders.
Various risk appetite indicators suggest manufacturing activity might have crested, but really, you don’t need to conduct any in-depth analysis to come to that conclusion. Things can’t get much “hotter,” especially if supply chain problems and labor shortages serve as a speed limit.
Although IHS Markit’s manufacturing index for the US ticked up to 63.4 (from a flash reading of 63.1), ISM manufacturing disappointed for July, printing 59.5, a touch below consensus (61) and a slight drop from June’s 60.6 read (combined figure, below).
July’s print leaves ISM at the lowest since January and IHS Markit’s gauge at a new record high.
“July saw manufacturers and their suppliers once again struggle to meet booming demand, leading to a further record jump in both raw material and finished goods prices,” IHS Markit’s Chris Williamson said, in characteristically colorful commentary. “Despite reporting another surge in production, supported by rising payroll numbers, output continued to lag well behind order book growth to one of the greatest extents in the survey’s 14-year history, leading to a near-record build-up of uncompleted orders,” he added.
Williamson called the current conjuncture “perhaps the strongest sellers’ market that we’ve seen since the survey began in 2007.”
That’s quite the statement, and it speaks to the persistence of the various pandemic-related supply chain disruptions that policymakers hope (pray?) will abate sooner rather than later. Shortages and delays were described by IHS Markit as “unprecedented,” especially when juxtaposed with turbocharged demand. Cost burdens were described as “record-breaking.”
The ISM breakdown was a bit less amenable to hyperbole, although not much. The new orders gauge, for example, fell, but only to 64.9. Prices paid dropped again, but the index remains very elevated.
ISM’s Timothy Fiore sketched a familiar scene playing out across the nation’s factories. Survey panelists are still having a difficult time meeting demand. “All segments” of America’s manufacturing sector are experiencing very long lead times and shortages for inputs, as well as surging commodity prices, he said, adding that absent workers, “difficulties in filling open positions” and forced idling associated with parts shortages, are still holding back the manufacturing sector.
Remember: It’s “transitory.”
Thank god “supply chain disruptions” has mostly been replaced by more nuanced characterizations.