Search This Blog

Friday, August 20, 2021

US ISM PMI fell again in July 2021.

 


The prices had decreased to 85.7 (-6.4) but still remained high because of persistent high freight costs, high crude prices, and high material prices which still maintained the supplier’s deliveries at a high level of 72.5 (-2.6) as a higher number indicated slower deliveries.  The producers had a reduction on their inventories (48.9, +2.2) because of freight issues and higher costs which drove them to increase local raw material usages (Est’d +5.1).


The producers increase their employment to prepare for Q4 festival orders.  However, the supplier’s deliveries impeded their production capabilities (58.4, -2.4) and this caused further declines in the customers’ inventories.  My primary concern would be the  declines in new order (64.9, -1.1), new export order (55.7, -0.5) and new local order (Est’d -0.6) because these 3 indicators showed that overseas and local consumers were cutting back on their spendings.  Since the local consumption constituted 70% of the US GDP, a significant pull-back would affect the GDP growth tremendously.


The backlog of order increased to 65 (+0.5) because the producers couldn’t increase their production to meet customers’ demands due to supply chain disruption problems.


All the above factors caused the PMI to decrease to 59.5 (-1.1) which was the lowest since February 2021.  In conclusion, the June PMI indicated that the US economic growth was in a downward trajectory and would experience a diminishing marginal GDP growth in the future.

No comments: