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With core inflation falling short again of the 2 percent goal, the pressure on the Fed to raise rates is growing. The window for attracting capital investments isn’t shrinking but rather on a timer waiting to shut.
U.S. manufacturing PMI was down to 52.8 in April according to the recent report from the Institute of Supply Management (ISM). \. Inventories are being drawn down as this is the sharpest monthly fall in prices since December 2008. Analysts attribute part of the drop in part to lower steel costs. New orders were particularly hard hit falling 5.7 points in April. Employment fell 5.3 points to a 52.4 indexed growth rate.
Here’s what some of the ISM survey respondents had to say:
Construction spending fell below consensus expectations with a -0.9 percent reading for March according to figures from the U.S. Census Bureau. Single-family homes saw the sharpest decline where spending fell 1.5 percent. U.S. factory orders for March rose by a better than expected 1.9% in March according to latest Census Bureau data. Part of the gains were from car and truck orders. This may be short-lived as MarketWatch reported last week that layoffs in the auto sector are rising due to decreased demand from higher retail car prices and tougher financing terms. For the scrap metal industry, this will ultimately mean reduced feedstock over the long-term.
Jobless claims spiked in late April and hasn’t come down from above consensus expectations but the Bureau of Labor Statistics’ Employment Report for April reported total nonfarm payroll employment increased by 263,000 last month. The unemployment rate decreased to 3.6 percent with notable job gains in professional and business services, construction, health care, and social assistance sub-sector industries. Manufacturing employment changed little in April which continues the flat hiring for three months now. In the twelve months before February 2019, the manufacturing sector was averaging 22,000 new jobs per month. With layoffs in the auto sector on the rise, this might be a calm before the storm if a trade deal isn’t reached to assuage industry participants.
The Bureau of Labor Statistics released the Employment Cost Index for March 2019. Civilian workers averaged a seasonally adjusted increase of 0.7 percent in wages and salaries as well as benefits from December 2018. On the year, employment costs rose 2.8 percent. Health benefits increased 1.9 percent on the year.
Outside of the U.S., Chinese manufacturing PMI fell to 50.1 in April and German manufacturing PMI rose a bit to 44.4. It appears that major manufacturing competitors to the U.S. are dealing with slowdowns as well. No surprises came out of the Bank of England’s Monetary Policy Committee meeting last week as Brexit has more or less frozen monetary policy movement until there are clearer signs on the break up.
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