But that Bubblicious uptick in manufacturing appears to be ending. For example, IHS Markit said yesterday that new orders were at their worst levels since the economic expansion began in 2009, and that we declining toward the flatline of 50 in the monthly Purchasing Managers’ Index.
At 50.9 in May, down from 53.0 in April, the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index indicated the slowest expansion in overall business activity since May 2016. The composite index is based on original survey data from IHS Markit’s PMI surveys of both services and manufacturing.As you can see, there's a decent correlation between the fates of the PMI index and the US economy as a whole.
The muted rise in output was attributed to softer demand conditions and subdued growth of new orders. The rise in new business in May was the softest recorded since the series began in October 2009.
Consequently, firms put the brakes on hiring. The latest increase in employment was only marginal and the smallest for just over two years. Companies also noted little strain on capacity due to weak demand, and reported the first decline in backlogs of work since June 2017.
Input price inflation eased for the third month running in May, despite continued comments from panellists regarding the ongoing impact of tariffs. The slower increase in costs and greater competitive pressures underpinned a renewed fall in output charges, the first such decline since February 2016.
The seasonally adjusted IHS Markit Flash U.S. Services PMI™ Business Activity Index posted 50.9 in May, down from 53.0 in April, to indicate a notable slowdown in service sector business activity. The upturn was only marginal overall and the slowest since the current sequence of expansion began in March 2016.Those slowdowns mirror a report from the Census Bureau on Friday that said manufacturers saw business drop across the board to start the 2nd Quarter of 2019.
New orders for manufactured durable goods in April decreased $5.4 billion or 2.1 percent to $248.4 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 1.7 percent March increase. Excluding transportation, new orders were virtually unchanged. Excluding defense, new orders decreased 2.5 percent. Transportation equipment, also down two of the last three months, drove the decrease, $5.4 billion or 5.9 percent to $85.4 billion.University of Wisconsin economist Menzie Chinn noted recently in Econbrowser that manufacturing output has declined for much of this year and employment had leveled off in the sector in 2019, with the Midwest starting to see job losses.
Shipments of manufactured durable goods in April, down three of the last four months, decreased $4.0 billion or 1.6 percent to $253.3 billion. This followed a 0.5 percent March decrease. Transportation equipment, down four consecutive months, led the decrease, $3.7 billion or 4.1 percent to $85.8 billion.
Unfilled Orders Unfilled orders for manufactured durable goods in April, down two of the last three months, decreased $0.7 billion or 0.1 percent to $1,179.1 billion. This followed a 0.1 percent March increase. Transportation equipment, also down two of the last three months, led the decrease, $0.4 billion or 0.1 percent to $810.6 billion.
Inventories of manufactured durable goods in April, up nine of the last ten months, increased $1.8 billion or 0.4 percent to $422.6 billion. This followed a 0.3 percent March increase. Transportation equipment, also up nine of the last ten months, led the increase, $1.5 billion or 1.1 percent to $136.1 billion.
None of this is a good sign going forward, and that calls to mind where we were in much of 2016, when manufacturing output and employment was showing some job losses (including 51,000 between January and May of that year), and ended up being the only year that the US has lost manufacturing jobs in the 2010s. That manufacturing slowdown likely played a role in convince some blue-collars in the Heartland take a chance on Donald Trump to turn around their flagging fortunes.
Now we flash forward 3 years, and the 2016-type slowdowns in manufacturing and the Midwestern economy as a whole are starting all over again. Except now we have a higher US budget deficit, with less room for upside as unemployment is likely as low as it can get, and more trade restrictions and adjustments are coming in the near future. Ruh roh.