Manufacturing is showing signs of bottoming at the lower levels, as the lack of aggregate demand does it’s thing with the service sector:

Highlights
Employment fell slightly and delays in delivery times eased, two factors that held down the July ISM index to 52.6 vs June’s 53.2. But that’s not the important news. The important news is the new orders index which remains extremely solid, at 56.9 and pointing to future strength for employment as well perhaps as slowing for future deliveries (slowing in deliveries is an indication of strength in demand, of congestion in the supply chain).

Export orders are not as strong as domestic orders but they are respectable, at 52.5 which is safely above breakeven 50 to indicate monthly growth. The reading here echoes even stronger export results the manufacturing PMI which was released earlier this morning.

Production is solid in this report, at 55.4 for a 7 tenths gain in the month. Inventories are flat and prices for inputs are showing modest pressure.

But it’s the new orders index that is the standout in this report and which hints at badly needed improvement in government data where new orders have yet to show strength. If the ISM orders pan out, the economy looks to get a second-half lift from its lagging sector, the factory sector.

“The July PMI® registered 52.6 percent, a decrease of 0.6 percentage point from the June reading of 53.2 percent. The New Orders Index registered 56.9 percent, a decrease of 0.1 percentage point from the June reading of 57 percent. The Production Index registered 55.4 percent, 0.7 percentage point higher than the June reading of 54.7 percent. The Employment Index registered 49.4 percent, a decrease of 1 percentage point from the June reading of 50.4 percent. Inventories of raw materials registered 49.5 percent, an increase of 1 percentage point from the June reading of 48.5 percent.”

Read more at http://www.calculatedriskblog.com/#JQDxgoXe0yUEgICs.99

A bit at odds with the ISM, though still on the low side:

Worse than expected and the chart says it all:

The deceleration that began with the peak in oil capex continues:

Trending lower ever since oil capex collapsed. But remember the hype for the one spike up it took early this year before reversing?

Wouldn’t surprise me if net trade, which worked in favor of Q2 GDP, reverses gets revised down for Q2 with the June data coming out on Tuesday, with growing oil imports, stronger non oil imports, and weaker exports as per the latest monthly data:

Worse than expected, Q1 revised lower, and note the year over year deceleration in the chart. The inventory correction previously discussed looks to be well underway and has much further to go to bring inventories into balance with sales.

Problem is, sales growth is declining, and the downward spiral will continue until ‘borrowing to spend’ steps up to support the negative effects of what I call unspent income, aka savings desires. And the historical drivers of private sector deficit spending- housing, cars, and business investment- are all going the wrong way.

And note that the much touted increase in consumer spending was in energy purchases, as prices went up, which tends to reduce other consumer purchases over time:

Highlights

Second-quarter GDP looks very weak at only a plus 1.2 percent annualized rate, but the details are positive. The biggest positive is consumer spending where growth, showing strength across readings, came in at a stellar 4.2 percent rate, more than double the first-quarter’s 1.6 percent rate.

A plus for the economy but a big negative in this report is slowing inventory accumulation which pulled down GDP by 1.2 percentage points in the quarter. But lean inventories point ahead to new accumulation which is a plus for future production and employment.

Another negative in the report is a reversal in residential investment, which had been running in the double-digit zone but which fell at an annualized 6.1 percent to pull down GDP in the second quarter by 2 tenths. A central concern remains nonresidential fixed investment, falling at a 2.2 percent rate and pulling down GDP by 3 tenths in the quarter. Weakness here points to weakness in business confidence and trouble ahead for productivity growth.

Price data do show some pressure with the overall index, reflecting the oil rebound, at 2.2 percent year-on-year, up from a revised 0.5 percent in the first quarter, but the core rate showing a little less pressure at 2.0 percent for, however, a still sizable 5 tenths gain.

Another negative is a 3 tenths downward revision to first-quarter GDP, now at a very thin plus 0.8 percent. But today’s report isn’t as bad it looks underscored by final demand which came in 2.4 percent or double the first-quarter’s rate. Low inventories are a plus for the third quarter as is the momentum underway in the economy’s central strength, the consumer.

Even this ‘stellar’ part of the report is very low vs prior cycles and working its way lower on an annual basis, which tends to minimize any seasonal factors:

And energy prices were what made it go up instead of down:

Down from last month, but a bit better than expected. New orders and backlogs soft, and the inventory build is more likely a sign of soft sales. And as the chart shows, it softened after the drop in oil capex and has yet to recover:

More evidence of the softening consumer extending into Q3. as the spike up a couple of months ago is now pretty much reversed. And, as previously discussed, this survey is one man one vote,
not one $ one vote, so with the fall in gas prices it’s likely to be overstating confidence:

PMC ride August 5th and 6th coming up fast!

First, thanks to all of you who’ve donated this year!

For the rest, hoping you’ll dig deep and donate this year, which also means you stay on my otherwise free email list! ;)

100% of donations got to cancer research at Dana Farber- all overhead is sponsored. The 2 day ride raised $45 million last year, $500 million since inception!

For me this is a ‘must give’, and just saying I personally donate a whole lot more than shows on my donation page.

So just click here now thanks:
http://www2.pmc.org/profile/WM0015

Been riding 3-4 hours a day getting in shape:

And not a mention of the last round of Saudi price cuts that obviously caused the recent price declines:

Going nowhere:

Key June ABI highlights:

Regional averages: South (55.5), West (54.1), Northeast (51.8), Midwest (48.2)

Sector index breakdown: multi-family residential (57.9), institutional (52.7), mixed practice (51.0), commercial / industrial (50.3)

Project inquiries index: 58.6

Design contracts index: 49.7

From the AIA: Architecture Billings Index remains on solid footing

Buoyed by increasing levels of demand across all project types, the Architecture Billings Index (ABI) was positive in June for the fifth consecutive month. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the June ABI score was 52.6, down from the mark of 53.1 in the previous month. This score still reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.6, down from a reading of 60.1 the previous month.

“Demand for residential projects has surged this year, greatly exceeding the pace set in 2015. This suggests strong future growth for housing in the coming year,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “While we expect to see momentum continue for the overall design and construction industry in the months ahead, the fact that the value of design contracts dipped into negative territory in June for the first time in more than two years is something of a concern.”

Read more at http://www.calculatedriskblog.com/#jQIsto1d5SHQiCkA.99

Explains some of the recent volatility in employment numbers?