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The US manufacturing sector is in a slump. Or worse.
At least that is what the story emerging from two key pieces of data out Monday seem to say.
The Institute for Supply Management (ISM) and S&P Global both released manufacturing Purchasing Managers Index (PMI) reports on Monday, and both showed activity in the manufacturing sector in June contracted at a faster pace than in May.
"Demand remains weak, production is slowing due to lack of work, and suppliers have capacity," Timothy Fiore, chair of the ISM's manufacturing business survey committee, said in a release on Monday. "There are signs of more employment reduction actions in the near term."
The ISM PMI came in at 46 in June, down from 46.9 in May, while S&P Global's PMI registered a reading of 46.3, down from 48.4 in May. For both indexes, readings below 50 indicate contractions; readings above 50 indicate expansions in activity.
These reports come after the final week of June saw several data points ranging from GDP to housing data to consumer confidence suggest we're seeing a turnaround in the US economic story. Consensus views on the economy have turned away from an imminent recession towards a potentially indefinite delay in this downturn.
If ever there was a time to lament the folly of Wall Street prognosticators and the media that follows them, it would seem Monday was that day.
But elsewhere on Monday, the Census Bureau released its May report on construction spending. And in this report, we learned that US manufacturing construction spending hit another record high in May.
Driven largely by investments in chip fabs and electric vehicle plants, this data shows that a bet on the US manufacturing base is not just being talked about but acted on by domestic firms.
And a brief note at the bottom of Wells Fargo's reaction to the ISM report served as a reminder that there is more nuance in the ISM data than a "US manufacturing hits three-year low" headline might suggest.
"While the ISM signals the sector is in correction, other manufacturing data have shown somewhat of a recent bounce in activity," Wells Fargo economists Tim Quinlan and Shannon Seery wrote. "The purchasing manager index is calculated as a diffusion, and thus does not show actual levels of production but merely how widespread the change in activity is throughout the sector."