Oct 3, 2019

Things may not be that bad for global manufacturing

Illustration: Rebecca Zisser/Axios

Tuesday's dramatic slide in U.S. manufacturing to the weakest level in 10 years generated jarring headlines and spooked the market, but there are signs the sector is improving on a global level.

Why it matters: Even in the U.S., things may not be as bad as the Institute for Supply Management's grim Tuesday report would suggest.

Between the lines: A survey of global manufacturing data from IHS Markit Tuesday showed that though the sector remains in contraction, the index rose for the second straight month.

  • Further, IHS Markit's U.S. manufacturing index showed "a marginally faster rate of improvement in the health of U.S manufacturing" and the highest reading in 5 months.
  • China, the world's No. 1 trading nation, looks to have recovered from weak readings earlier this year, which should help boost factory activity in the moribund eurozone and around the globe.
  • Emerging markets also have seen a solid reprieve with IHS' broad metric of EM manufacturing rising in September for a third consecutive month.

The last word: "The data provides no room for complacency, but is not quite as bleak as the ISM data suggests," Alan Ruskin, chief international strategist at Deutsche Bank, said in a note to clients.

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Analysts expect key U.S. manufacturing index to improve this month

Data: Institute for Supply Management; Chart: Axios Visuals

The U.S. jobs report will be the most watched piece of data this week, but Friday will also bring the October reading of the Institute for Supply Management's manufacturing data. The index fell to the lowest level since June 2009 in September.

Why it matters: The U.S. manufacturing industry has seen a consistent decline all year, falling into recession earlier in the year and showing outright contraction for the second month in a row last month.

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Services data is following manufacturing

Data: Institute for Supply Management; Chart: Axios Visuals

Bullish market analysts and money managers have been somewhat dismissive of deteriorating manufacturing data this year and its importance, arguing that the sector makes up a minute portion of the U.S. economy.

Why it matters: While that is true, manufacturing is a leading indicator, and more bearish investors have insisted the sector's decline would drag the rest of the economy down with it.

Go deeperArrowOct 4, 2019

Index tracking U.S. services sector activity falls to 3-year low

An index that tracks activity within the services industry fell to a 3-year low in September, while a gauge of hiring within the sector dropped to the lowest level since 2010, according to the ISM non-manufacturing activity survey.

Why it matters: It’s the latest indicator pointing to an economic slowdown in the shadow of a trade war between the world's 2 largest economies, following the 2nd straight month of contraction in the U.S. manufacturing sector. While the services industry is still growing, this is the first sign that the all-important services industry — which makes up a way bigger slice of the economy than manufacturing (about 70%) — is starting feeling the blow.

Go deeper: How the China trade war threatens U.S. manufacturing jobs