The marquee gauge of US factory activity slipped back below the threshold separating expansion from contraction in April, while an underlying measure of price pressures rose sharply.
At 49.2, the ISM manufacturing print disappointed consensus, which expected the headline to remain north of the 50 demarcation line for a second month.
The two key underlying momentum measures, production and new orders, both slipped meaningfully, with the latter falling into contraction territory.
Meanwhile, the final read on S&P Global’s factory gauge for the US was 50 on the nose — so, stall speed. (That was actually a tick better than the flash estimate.)
“Business conditions stagnated in April, failing to improve for the first time in four months and pointing to a weak start to the second quarter for manufacturers,” Chris Williamson, S&P Global’s chief business economist said. “Order inflows to factories fell for the first time since December, meaning producers had to rely on orders placed in prior months to keep busy.”
Disconcertingly, the ISM prices paid gauge jumped sharply, to 60.9, validating fears that higher commodity prices are showing up on the factory floor at the risk of rekindled inflation for goods.
April’s print on the prices index was the highest since summer 2022.
You don’t have to be an especially gifted editor to write the spin: Contraction-territory prints on both the ISM headline and new orders gauge set against a dramatically higher reading on the prices index equals stagflation.
Do note: That spin’s likely to resonate more than it might’ve otherwise given last week’s optically poor headline GDP print. (Which I continue to insist belied strong underlying demand and investment.)
The ISM anecdotes were best described as mixed, with some panelists indicating strong demand and others the opposite. The only constant is uncertainty.
S&P Global’s Williamson offered some nuance on prices. “From an inflation perspective, it was reassuring to see prices charged for goods rise at a slower rate than the 11-month high seen in March,” he said, before cautioning that “the rate of increase nevertheless remains elevated by historical standards — and well above the average seen in the decade prior to the pandemic — as firms continued to pass higher commodity prices on to customers.”
This is pretty much the worst economic setup in an election year Biden could see. I think we all know what comes next. Have a plan.
If only those with the resources to implement a plan would use their time/money/connections to help prevent the worst from happening instead of being ready to move to New Zealand.
That sounds noble, but the problem is it takes a lot less time/money/connections to have a plan than it likely will to prevent the worst. Call me cynical, but being childless, well…motivation to fight isn’t so strong.
Sounds very romantic. The echo chambers of cult members are impenetrable regardless of resources. As the DNC.
Blognonymous: A plan? Thinking tropical island…..if we’re going to turn into a banana republic, might as well go to a real one, with lots of bananas, beaches, tradewinds and warm clear seas!