Despite the weakness in ‘hard’ industrial production data, US Manufacturing ‘soft’ survey data from ISM and Markit surged in November and December. PMI rose to 54.3 final for December – a 21-month high – with employment rising and inventory-building. However, stagflation concerns continue to build as new orders declined and input price inflation accelerated. ISM rose to its highest since Dec 2014 with prices paid soaring to the highest since June 2011.
Spot the difference between ‘hard’ and ‘soft’ data…
As Stagflation looms…
The breakdown shows the surge in pries paid…
Respondents seem completely convinced that everything is awesome and will continue to be:
“Ramping up for year-end by reducing inventory.” (Chemical Products)
“Very strong month in terms of booking and billing which will contribute to a good overall year revenue-wise.” (Computer & Electronic Products)
“Our business remains strong and we are seeing continued growth.” (Plastics & Rubber Products)
“We have been fairly steady the last few months and it appears business is strong into the 1st quarter of next year.” (Primary Metals)
“Moving into [a] more inflationary environment, with lots of pressure to increase prices on a number of fronts.” (Food, Beverage & Tobacco Products)
“Business continues to be brisk with an uptick of RFQs. Customers are earmarking funds for capital equipment upgrades.” (Machinery)
“Hiring still tight on available local labor. Business, by segments, still uneven. Some consumer markets very (seasonally) strong, but industrial markets lagging.” (Transportation Equipment)
“Business conditions are good, demand is growing.” (Miscellaneous Manufacturing)
“Continued strong demand for product and strong forecast for next year.” (Nonmetallic Mineral Products)
“December 2016 is way ahead of December 2015.” (Fabricated Metal Products)
Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The manufacturing sector ended 2016 on a buoyant note, with promising signs that growth could pick up further in 2017.
“The pace of growth signalled by the PMI in December was the strongest for almost two years, and the combination of improving current demand and optimism for a further upturn in 2017 prompted companies to build inventory and boost capacity. The latter was reflected in the largest rise in factory payroll numbers for one and a half years.
“The upturn is being driven almost entirely by rising demand from domestic customers, with exports stymied by the dollar’s recent surge.
“The improvement in the survey data raises hopes that the official data will soon likewise show signs of the manufacturing sector’s recent malaise lifting.
The latest official data showed manufacturing output stagnant compared to the start of the year, but the December PMI is consistent with production growing at an annualised rate approaching 4%.”