US Manufacturing, Meet Fake News: One Of These Is Wrong

The state of US manufacturing at any given moment is supposed to be simple: it is either expanding, or it is contracting. Except, of course, when it is doing both.

We wont bore readers with details (we did that earlier), and instead will just present two headlines with some supporting data, from two different sources discussing the sector which, with all due respect to the US services sector, still accounts for well more than half of the S&P"s net income.

First, here is Markit, which in its June report on US manufacturing said that "Manufacturing growth weakens again in June" with the chief economist at IHS, Chris Williamson, saying “Manufacturers reported a disappointing end to the second quarter, with few signs of growth picking up any time soon."

And then there is Bloomberg, which in a featured article writes "Manufacturing Pickup in U.S. Signals Boost to Economic Growth" and adds "American factories powered up in June at the fastest pace in nearly three years, with robust advances in production, orders and employment that indicate a firming in the economy"

Good luck spotting the real fake news.

US Services Economy Hits 15-Month Highs And 5-Month Lows: "Companies Are Becoming More Cautious"

Markit"s Services PMI tumbled to 5-month lows in February (down to 53.8) - erasing the post-Trump-bounce - as rates of expansion in activity, new work and employment all eased. The February drop in PMI is the largest in a year as Markit warns that "business optimism has mellowed.. and companies are becoming more cautious."

Of course that is the absolute opposite of what ISM Services reports - surging higher to a 15-month high at 57.6 (well above expectations)

ISM breakdown shows output and employment all rising faster - the exact opposite of Markit"s PMI data.

With a solid bounce in new orders - the opposite of what PMI data showed.

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“Taken together, the PMI survey readings for the first two months of the year suggest the economy is growing in the first quarter at a respectable annualised rate approaching 2.5%.

“The burning question is whether the February slowdown merely represents some pay-back after a strong start to the year for US businesses, or whether it’s the start of a more entrenched slowdown.

“A warning clue rests with the business expectations index, which indicates that business optimism has mellowed back to its pre-election level, suggesting that companies are becoming more cautious with regard to spending and hiring.

“However, companies continue to report buoyant domestic demand, especially from consumers, and continue to take on staff in reasonable numbers, the rate of hiring having slowed only modestly. The February survey is broadly consistent with 175,000 payroll jobs being added, which represents a pace of hiring that will do little to deter the Fed from delaying its next rate hike.”

The overall composite PMI (Services plus Manufacturing) dropped to its lowest since September.