U.S. August ISM Manufacturing PMI falls short of expectations! Gold breaks below the 2480 level
The U.S. ISM Manufacturing PMI index in August rose slightly to 47.2, but still below 50, indicating the manufacturing sector has been contracting for the fifth consecutive month. New orders and output have dropped to multi-month lows, with production essentially stagnant. Despite weak orders, production costs are still rising, leading to expectations that the Federal Reserve may start cutting interest rates. Manufacturers have shown some improvement in inventory management, indicating that there is some room for economic adjustment
U.S. manufacturing activity shrank for the fifth consecutive month in August, reflecting a faster decline in orders and output.
Data released on Tuesday showed that the Institute for Supply Management (ISM) manufacturing PMI index rose slightly by 0.4 points to 47.2, remaining below the 50 threshold for the fifth consecutive month. However, it is above 42.5, a level that ISM believes typically indicates gradual expansion in the overall economy in the future.
Following the release of this report, the S&P 500 index and U.S. Treasury yields continued to decline, with gold briefly falling to around $2470 before rebounding.
Hard data such as manufacturing production and business equipment spending indicate that the manufacturing sector is essentially stagnant. The organization's production index fell for the fifth consecutive month to its lowest level since May 2020, further entering contraction territory.
The ISM manufacturing new orders index dropped to 44.6, hitting its lowest level in 15 months; output continued to decline, with the production sub-index falling to 44.8; export orders also shrank at the fastest pace since the beginning of this year; despite weak orders, manufacturers are facing rising input product prices, possibly due to soaring freight costs.
Declining orders and a continued reduction in backlogs are hindering production, indicating that the manufacturing sector is struggling. Although the ISM factory employment index contracted for the third consecutive month, the pace slowed down, with the employment sub-index rising to 46.0.
Rising borrowing costs and uncertainty surrounding the November presidential election have led some companies to postpone capital spending and hiring. Nevertheless, the market expects the Federal Reserve to begin cutting interest rates later this month, which should provide some relief.
It is worth noting that the sub-index measuring manufacturers' payment prices rose from 52.9 in July to 54.0, indicating that the current deflation in goods may have ended, but it may not have a substantial impact on the slowing inflation.
Costs remain a headache. The ISM raw materials price index rose from 52.9 to a three-month high of 54 in August. After declining for most of 2023, the input cost index has shown price increases every month this year.
A favorable development in the latest ISM data is that manufacturers' customers are managing their inventory levels better. Since the end of last year, the customer inventory index has consistently shown a decrease in inventory