US PMI: Warning Sign for Trump and US Economy

  • On Tuesday, the US PMI data were released. The IHS/Markit survey put the US August manufacturing PMI at 50.3—the lowest level in a decade. However, the final reading was better than the flash reading released last month.
  • US equity markets are trading on a negative note today. As of 10:30 AM ET, Boeing, General Electric, and Apple have fallen 3.5%, 1.8%, and 2.0%, respectively. The S&P 500 has fallen 0.89%.

IHS/Markit US PMI data

Today, the IHS/Markit released the US PMI data. The August manufacturing PMI was 50.3, which is the lowest level since September 2009. While the final reading is still better than the 49.9 flash reading, it reinforces slowdown fears. Commenting on the data, Chris Williamson, a chief business economist at IHS Markit, said, “Output and order book indices are both among the lowest seen for a decade, indicating that manufacturing is likely to have again acted as a significant drag on the economy in the third quarter, dampening GDP growth.”

Data points to weakness

The US PMI data brought plenty of bad news for President Trump and the US economy. According to IHS/Markit, the US manufacturing output could fall at a 3% annual rate. The company also pointed to the weak export sector. The survey showed that weak export orders were due to President Trump’s trade war and the global economic slowdown. Notably, the survey also highlighted the weakness in the job market. Despite US economic growth cooling off, the US job market has been healthy. The strong job market contributed to the US consumer sector’s strength.

ISM US PMI data

Meanwhile, the ISM US PMI data were also released today. The data showed that the US manufacturing PMI was at a three-year low of 49.1 in August. The data were lower than analysts’ expectations. The ISM US PMI fell below 50, which shows a contraction. The survey also found that trade tensions remained a top concern for US companies. Fresh US tariffs on Chinese goods started in September. We also saw a divergence in China’s August PMI. While the official version showed a contraction, the IHS/Markit survey showed a PMI above 50. Notably, several economists have said that President Trump’s trade war is hurting the economy. However, he has sought to put the blame at the Fed’s door.

Construction spending

Meanwhile, the Department of Commerce said that US construction spending expanded 0.1% in July to a seasonally adjusted annual rate of $1.29 trillion. However, US construction spending fell 2.1% in the first seven months of 2019. Notably, the housing and manufacturing sectors have been weak despite the US economy growing at a steady pace. Business investment has been another weak link in the US economy. Overall, revised estimates showed that the US economy expanded 2% in the second quarter—down from 3.1% in the first quarter.

US stocks trading down

US stock markets are in the red today. As of 10:30 AM ET, Apple (AAPL), Boeing (BA), and General Electric (GE) have fallen 2.0%, 3.5%, and 1.8%, respectively. The S&P 500 (SPY) has fallen 0.89%.