Global Manufacturing Hits A 22 Month Low

Global Manufacturing – Markit PMI Matches Highest Estimate

The Markit global manufacturing PMI beat estimates and increased from August. The ISM PMI did the reverse. Prior to this set of reports, the ISM reports have been wildly optimistic. But the Markit ones have shown weakness.

Let’s review the Markit report first. The September flash Markit reading suggested manufacturing was strong and service sector growth was weakening. We’ll need to wait until Wednesday to see if service sector growth rebounded in the second half of September.

The Markit PMI was 55.6 which beat estimates for 54.5 and August’s reading of 54.7. It matched the high end of the consensus range. It was unchanged from the mid-month flash reading.

This was a 4 month high. Output was the highest this year. The strength was in the domestic market while tariffs caused export orders to be flat. Tariff concerns caused the business confidence outlook to fall to the lowest point in a year.

The tariff worries could be consoled by the next report because America and Canada struck a trade deal as I will detail in my next article.

This PMI shows there are some capacity constraints because backlogs were built at the fastest rate in exactly 3 years. Input costs also rose quickly and there were component shortages.

2/3rds of the increase in input costs was blamed on tariffs, with high oil prices being a big factor as well. It’s interesting to see that prices were passed through to users because the PPI and CPI numbers have been weak.

This could signal inflation will increase slightly in September. On the other hand, pre-production inventories rose the quickest since December 2016, signaling the shortages might come to an end.

Just like we’ve seen in almost all the manufacturing reports, hiring was the slowest in 3 months. The Markit report is still weaker than the ISM PMI, but the difference between the two shrunk this month.

Even though this was a strong report, Q3 overall had the lowest Markit PMI since Q4 2017.