The prices subindex had decreased to 41.8 (-2.4) because of weak employment (48.1, -3.3) and production (46.7, -4.4). The employment and production decreased despite an increase in new order (45.6, +3) and new local order (Est’d +5.7).
The customers’ inventories were depleted further due to lower production and an increase in new order which caused the backlog orders to increase to 38.7 (+1.2). The supplier’s delivery of 45.7 (+2.2) showed that supply disruption was no longer an issue.
The producers cut back on their inventories (44, -1.8), employment and production because they believed that the increase in new orders was unsustainable.
In conclusion, the above factors caused the PMI to fall to 46 (-0.9) and the US economy would still enter into a recession by the end of 2023 as the PMI had been in a contractionary (below 50) for 8 months already.
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