US factory activity contracted a third month in June, the first of this week’s top-tier data out of the world’s largest economy showed.
At 48.5, ISM manufacturing missed estimates. Economists wanted 49.2 from the headline. It was the weakest reading since February and generally underscored the notion that the economy’s slowing.
Note that the ISM manufacturing headline’s only printed above the 50 demarcation line once since October of 2022.
Meanwhile, the final read on S&P Global’s US factory PMI for June was 51.6, virtually unchanged from the flash reading and the highest since March.
The underlying ISM indexes were uniformly weak, although the new orders gauge, at 49.3, showed a marked improvement from the prior month’s abysmal 45.4 print. Everything’s in contraction territory except for the prices index, which printed 52.1. That (the prices print) actually constituted a relief. May’s reading, you might recall, was an uncomfortable 57.
“US manufacturing activity continued in contraction at the close of the second quarter,” Tim Fiore said Monday. “Demand remains subdued, as companies demonstrate an unwillingness to invest in capital and inventory due to current monetary policy and other conditions.”
S&P Global’s chief business economist Chris Williamson told a broadly similar story. Notwithstanding the expansionary headline, US manufacturers are still “struggling to achieve strong production growth, hamstrung by weak demand from domestic and export markets alike,” he wrote, adding that
“although the PMI has been in positive territory in five of the first six months of 2024, growth momentum remains frustratingly weak.”
It’s interesting to see treasury yields continue to rise. Seems that the narrative is a Republican sweep would be inflationary which is odd to hear. I get it since Trump is a populist and would force Republican leadership to do his bidding, but I’m still betting on a divided government and any stimulus being similar to the last time around (i.e. tax cuts for the wealthy) which might lead to more asset inflation but not overall inflation. Bonds are looking quite good again if you ask me.
How about the inflationary impact of “the largest deportation in American history” and the hiked up import taxes (tariffs)? He does not need any Congressional approval to do those.
That said, I was thinking along your lines until I remembered that Trump himself floated defaulting on US debt, at least for the paper held by foreign governments. I’ll have to look and see if your next Treasury Secretary Peter Navarro has written anything about that.
Some years back I watched as ICE rounded up 3000 possible illegals in the Waterloo, IA. They spent weeks trying to deport them without much success. Trump has said he wants to deport tens of millions. Who will be locating all these folks, knocking on all those doors, pushing them through the courts, housing them, and then sending them, well somewhere? Who will pay for this? Who will they hire to do this? He couldn’t build the wall. DeSantis moved a couple thousand and they were still in the US. (BTW, DeSantis for dogcatcher.) Who will the businesses these folks are working for hire to replace them? Workers pay taxes (they really do). What about the loss of revenue, rents, consumption?
One way or the other I have to believe that putting high tariffs on all imports will not only be inflationary but will reduce our revenues from exports as our trading partners retaliate. Hopefully, this dude will have one or two actual adults in his cabinet. He never did fill all the appointments he had to during his term.
Peter Navarro and Stephen Miller will be the adults in the room. Even if one rational soul managed to sneak through the stringent vetting process (they learned their lesson last time) that person would not have the cudgal of “that might hurt your reelection chances” to challenge him.
Yes price action in bonds last couple of sessions is not reacting to a slower economy narrative. I had a similar impression to yours, the prospect of a red sweep after the debate along with the populist move right in France might be reviving term premium ghosts. Anyway, even if next year marks the return of inflation and Trump the short end of the curve seems attractive on this dip, the Fed is going to cut after all.
Dayjob I agree.
Trump’s going to try to get to zero rates as soon as he can, lol.