A Tale Of Two Manufacturing Prints

So it was more mixed signals about the state of the global economy on Thursday with manufacturing reports out of the UK and the US painting starkly different pictures of economic health.

At around 4:30 ET we got the UK print. Here’s the Bloomberg summary:

• U.K. Aug. Manufacturing PMI 53.3 vs 48.3 in July; Est. 49

• CIPS and Markit Economics release purchasing managers’ index for U.K. manufacturing in August.

• Forecast range from 47.7 to 50.5 from 28 economists

• Index rises to 53.3 from 48.3 in July; Year ago 51.6

  • Highest reading since Oct. 2015

• New Orders rise to 54.6 vs 47.8 in July

Here’s the visual from Markit:

(Chart: Markit)

And a little more nuance from Citi:

(Chart: Citi)

And here’s Markit’s commentary:

“August saw solid rebounds in the trends in UK manufacturing output and incoming new orders. Companies reported solid inflows of new work from both domestic and export sources, the latter aided by the sterling exchange rate. Employment rose for the first time in the year-to-date. At 53.3 in August, the seasonally adjusted Markit/CIPS Purchasing Managers’ Index recovered sharply from the 41-month low of 48.3 posted in July following the EU referendum.”

The immediate effect:

“GBP swap forwards fade richness versus EUR equivalents following stronger than expected Aug. manufacturing PMI. GBP 5y5y forward swap rate vs EUR spread at 26bp vs Aug. 29 low of ~13bp, narrowest level since Nov. 2012.”

Meanwhile, stateside, we got a rather abysmal reading. Again, we go to Bloomberg for the breakdown:

• Aug. U.S. ISM Manufacturing Falls to 49.4 vs Est. 52.0

• Manufacturing Index at 49.4 vs est. 52

• Forecast range 50.7 - 53.4 (79 economists surveyed)

• PMI fell to 49.4 vs 52.6 last month

• New orders fell to 49.1 vs 56.9

• Employment fell to 48.3 vs 49.4

• Supplier deliveries fell to 50.9 vs 51.8

• Inventories fell to 49.0 vs 49.5

• Customer inventories fell to 49.5 vs 51.0

• Prices paid fell to 53.0 vs 55.0

• Backlog of orders fell to 45.5 vs 48.0

• New export orders unchanged at 52.5 vs 52.5

• Imports fell to 47.0 vs 52.0

Right so that’s contraction territory. Here’s the full report from ISM:

And here’s the color:

“Manufacturing contracted in August as the PMI registered 49.4 percent, a decrease of 3.2 percentage points from the July reading of 52.6 percent, indicating contraction in manufacturing for the first time since February 2016 when the PMI registered 49.5.”

The concurrent FX moves were hilarious. Have a look:

And the reaction from US stocks, crude, and gold:

Here’s Barclays quick take:

“Our final reading of the Barclays global manufacturing confidence index weakened to -0.57 in August vs. -0.24 in July, dragged by a decline in US manufacturing confidence and mixed reports from China. In the US, the ISM index registered a sub-50 print on the back of weakness in production and new orders, which signals weak underlying momentum in the manufacturing sector. In China, the official NBS PMI staged a rebound while the Caixin PMI retreated, sending out mixed signals yet again. In the euro area, overall sentiment weakened on account of a sharp decline in Italian confidence and further deterioration in France. The UK, though, was a bright spot in August, with manufacturing PMI rebounding strongly amid domestic relief and an external boost provided by a weaker currency. Looking ahead, we believe global manufacturing confidence is likely to remain under pressure, as European forward-looking indicators point to further deterioration, US manufacturing activity should fail to improve significantly over the rest of this year, and mixed Chinese August PMIs suggest some near-term - but likely unsustainable - improvement.”

So hell, all we need now is a sub 150K jobs print on Friday and you can kiss that September rate hike goodbye.