U.S. Manufacturing Shows Contraction (SPY)
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Markets are trading lower early on Monday after U.S. manufacturing PMI data came in at 49.7 versus an expected reading of 52, according to an ISM report this morning. Investors often times use ISM data to glean outcomes for Non-Farm Payrolls and CPI, which are out later this month.
On the manufacturing side, the 49.7 reading is very gloomy and shows that economic activity in the manufacturing sector contracted in June for the first time since July 2009. Of the 18 manufacturing industries, seven are reporting growth in June and nine industries reporting contractions. Comments from the panel range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China.
On a more positive note, the overall economy grew for the 37th consecutive month. Also of interest, the Prices Index for raw materials decreased significantly for the second consecutive month, registering 37 percent, which is 10.5 percentage points lower than the 47.5 percent reported in May – a huge drop in prices.
"Slowing world economies, particularly China, are reducing 3Q and later orders and drastically dropping some raw material prices," noted a Chemical Products manufacturer.
Another manufacturer in the Machinery industry said "Business is still strong, with some nagging question whether it will be sustained."
New Orders in June dropped 12.3 percent from a reading of 60.1 in May to 48.7. Employment was relatively stable, shedding only 0.03 percent.
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On the manufacturing side, the 49.7 reading is very gloomy and shows that economic activity in the manufacturing sector contracted in June for the first time since July 2009. Of the 18 manufacturing industries, seven are reporting growth in June and nine industries reporting contractions. Comments from the panel range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China.
On a more positive note, the overall economy grew for the 37th consecutive month. Also of interest, the Prices Index for raw materials decreased significantly for the second consecutive month, registering 37 percent, which is 10.5 percentage points lower than the 47.5 percent reported in May – a huge drop in prices.
"Slowing world economies, particularly China, are reducing 3Q and later orders and drastically dropping some raw material prices," noted a Chemical Products manufacturer.
Another manufacturer in the Machinery industry said "Business is still strong, with some nagging question whether it will be sustained."
New Orders in June dropped 12.3 percent from a reading of 60.1 in May to 48.7. Employment was relatively stable, shedding only 0.03 percent.
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