Monday data round-up: Dueling PMIs, construction spending
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Euro STOXX 600 index up ~0.4%
Dollar up slightly; crude gains ~1%; bitcoin up >1%; gold slips
U.S. 10-Year Treasury yield jumps to ~4.48%
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MONDAY DATA ROUND-UP: DUELING PMIs, CONSTRUCTION SPENDING
Investors embarked on the month of July with two competing looks at the manufacturing sector and a surprise dip in construction outlays.
Activity at U.S. factories USPMI=ECI unexpectedly shrank at a slightly accelerated pace last month, according to the Institute for Supply Management (ISM), whose purchasing managers' index (PMI) delivered a reading of 48.5, undershooting consensus by 0.6 points.
A PMI number south of 50 indicates monthly contraction.
"Demand remains subdued, as companies demonstrate an unwillingness to invest in capital and inventory due to current monetary policy and other conditions," says Timothy Fiore, chair of ISM's Manufacturing Business Survey Committee.
Scratching below the surface, on one hand new orders decreased at a shallower pace and prices paid - an inflation predictor - cooled down.
On the other hand, production, employment and export orders slid below 50, and inventories contracted at an accelerated pace.
Remarks from survey participants skewed grim, with phrases like "production is lower due to decreased demand for products" and "elevated financing costs have dampened demand," peppered throughout.
Not to be outdone, S&P Global also issued its final take on June Manufacturing PMI USMPMF=ECI, which resulted in a 0.1-point downgrade to 51.6, still safely in expansion territory and a 0.3 point improvement over the final reading for May.
Even so, Craig Williamson, S&P Global's chief business economist writes that U.S manufacturing remains "hamstrung by weak demand from domestic and export markets alike."
Headwinds related to the post-pandemic demand switch from goods to services, as well as inflation and higher-for-longer interest rates, together with election-related uncertainties, are "suggesting the manufacturing sector is bracing itself for further tough times in the coming months," Williamson adds.
The S&P Global and ISM indexes differ in the weight they apply to their various components (new orders, employment, etc).
The graphic below looks at how closely - or not - the dueling PMIs agree.
It shows S&P Global has held a sunnier view of U.S. factory activity than ISM since July 2023.
Finally, expenditures on U.S. construction projects USTCNS=ECI surprised to the downside by decreasing 0.1% in May, instead of rising 0.2% as analysts expected.
That's the bad news. The good news is it follows in the wake of April's upward revision, to a gain of 0.3% from a 0.1% loss.
The report from the Commerce Department also showed outlays on residential projects - the tentpole of this report in months past, as homebuilders scramble to make up a supply dearth - decreased by 0.2%.
Government expenditures rose 0.5%, while spending on privately funded projects fell by 0.3%.
Outlays on transportation and manufacturing projects jumped by 1.2% and 1.3%, respectively, in a good sign for the industrial sector.
"The data show loss of momentum in residential and nonresidential construction spending but stronger public spending so far in Q2," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
(Stephen Culp)
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FOR MONDAY'S EARLIER LIVE MARKETS POSTS:
WALL STREET EDGES UP IN EARLY TRADE - CLICK HERE
AT 2024 HALFWAY MARK, MOMENTUM LEADS, BUT GROWTH IS ON ITS HEELS - CLICK HERE
YEN INTERVENTION THREAT KEEPS GS ON SIDELINES - CLICK HERE
FRENCH BANKS AVOIDING THE WORST FOR NOW - CLICK HERE
SKEWED RISK FROM PAYROLLS - CLICK HERE
FRENCH STOCKS BOUNCE BACK, BUT STILL BELOW EARLY JUNE LEVELS - CLICK HERE
FRENCH STOCKS SET TO RALLY AFTER FIRST ROUND OF VOTING - CLICK HERE
ISM manufacturing PMI https://reut.rs/3W5Z14A
Dueling PMIs https://reut.rs/4bmhEG1
Construction spending https://reut.rs/3VOttPf
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