In May, US PMI manufacturing dropped sharply to 50.6, down from 52.6, missed expectation of 52.7. It’s also the lowest level in 116 months. PMI services dropped to 50.9, down from 53.0 and missed expectation of 53.5. it’s the lowest level in 39 months. PMI Composite dropped to 50.9, down from 53.0, a 36-month low.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“Growth of business activity slowed sharply in May as trade war worries and increased uncertainty dealt a further blow to order book growth and business confidence.
“A decline in the headline ‘flash’ PMI to its lowest for three years pushes the survey data down to a level historically consistent with GDP growing at an annualised rate of just 1.2% in May. Worse may be to come, as inflows of new business showed the smallest rise seen this side of the global financial crisis. Business confidence has meanwhile slumped to its lowest since at least 2012, causing firms to tighten their belts, notably in respect to hiring. Jobs growth in May was the weakest seen for over two years.
“The slowdown has been led by manufacturing, but shows increasing signs of spreading to services. The survey data have been consistent with falling manufacturing output since February, but suggest that the sector’s woes intensified in May to mean factories will therefore likely act as an increasing drag on the economy in the second quarter. Trade wars remained top of the list of concerns among manufacturers, alongside signs of slower sales and weaker economic growth both at home and in key export markets.
“However, an additional concern is the spreading of the malaise to the service sector, growth of which slumped in May to one of the weakest since the global financial crisis. With the service sector’s performance being a key gauge of the health of domestic demand, this broadening-out of the slowdown poses downside risks to the outlook.”
Full release here.
Australia consumer sentiment suffered record plunge, but overall pandemic experience much less debilitating
Australia Westpac Consumer Sentiment dropped sharply by -17.7% to 75.6 in April. That’s the single biggest monthly decline in the 47 year history of the survey. The index also dived through the trough during 2008-2009 global financial crisis, to the levels only seen during the deep recessions of the early 1990s (64.6) and early 1980s (75.5).
Though, Westpac chief economist Bill Evans noted that “Australia’s pandemic experience to date has been much less debilitating than that of the hardest hit areas abroad… Recent evidence showing a clear slowing in new cases that indicates policy measures are working to contain the spread.” He expected the economy to be lifted in the December quarter following “three consecutive quarters of economic contraction”.
Regarding the upcoming RBA meeting on May 5, Evans said “It seems likely that the Board considers it has done its duty to support the economy and will now look to governments if further support for the economy is required.”
Full release here.