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Thursday, September 2, 2021
Demand pressures continue through the summer
For months now, Morning Brief readers have been reminded, time and again, that the economy is in no way suffering from a demand problem.
And there is nothing in recent data that suggests this trend is abating, even as the Delta variant of COVID-19 continues its march across the globe.
As happens at the beginning of each month, the Institute for Supply Management (ISM) and IHS Markit each released readings on manufacturing activity for the prior month. And in both reports we saw that the sector continued a robust expansion in August.
“August PMI data from IHS Markit signaled a marked improvement in the health of the U.S. manufacturing sector,” the firm said in its report, published Wednesday. “Although slightly softer than that seen in July, the expansion was supported by steep upturns in production and new orders.”
The purchasing managers’ index, or PMI, registered a reading of 61.1 in August — a four-month low for the series but still among the strongest this index has seen over the last 14 years. Any reading above 50 indicates the manufacturing sector is expanding; readings below 50 indicate contraction.
In the ISM’s report, Tim Fiore, chair of the Institute’s manufacturing business survey committee, said “panelists reported that their companies and suppliers continue to struggle at unprecedented levels to meet increasing demand.” The ISM’s PMI hit a reading of 59.9 for August, up from July’s reading of 59.5.
“All segments of the manufacturing economy are impacted by record-long raw-materials lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products,” Fiore added. However, he also noted familiar themes — specifically a shortage of workers and ongoing global supply bottlenecks — are converging with the relentless pandemic.
“The new surges of COVID-19 are adding to pandemic-related issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — that continue to limit manufacturing-growth potential. However, optimistic panel sentiment remained strong, with eight positive comments for every cautious comment,” Fiore added.
So while recent weeks have brought us a mixed bag of data on consumer health, while expectations for Friday’s jobs report are for more modest gains in August, what the production side of the economy continues to signal is that this expansion remains alive and well.
The current backdrop is imperfect — supply chain pressures, labor and materials shortages, and higher costs remain volatile inputs for producers trying to manage forward order books. But the order books remain full and growing.
Or, as Fiore said Wednesday, “demand remains at strong levels, despite increased prices for nearly everything.”
By Myles Udland, reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland
What to watch today
Economy
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7:30 a.m. ET: Challenger Job Cuts, year-over-year, August (-92.8% in July)
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8:30 a.m. ET: Initial jobless claims, week ended August 28 (345,000 expected, 353,000 during prior week)
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8:30 a.m. ET: Continuing claims, week ended August 21 (2.808 expected, 2.862 million during prior week)
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8:30 a.m. ET: Unit labor costs, 2Q final (0.9% expected, 1.0% in prior print)
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8:30 a.m. ET: Trade balance, July (-$70.9 billion expected, -$75.7 billion in June)
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10:00 a.m. ET: Factory orders, July (0.3% expected, 1.5% in June)
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10:00 a.m. ET: Durable goods orders, July final (-0.1% expected, -0.1% in prior print)
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10:00 a.m. ET: Non-defense capital goods orders, excluding aircraft, July final (0.0% in prior print)
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10:00 a.m. ET: Non-defense capital goods shipments, excluding aircraft, July final (1.0% in prior print)
Earnings
Pre-market
Post-market
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4:05 p.m. ET: DocuSign (DOCU) is expected to report adjusted earnings of 39 cents per share on revenue of $485.53 million
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4:05 p.m. ET: MongoDB (MDB) is expected to report adjusted losses of 40 cents per share on revenue of $184.00 million
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4:15 p.m. ET: Broadcom (AVGO) is expected to report adjusted earnings of $6.85 per share on revenue of $6.76 billion
Politics
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Two committees in the U.S. House of Representatives — Natural Resources and Oversight — will be the first on Capitol Hill to formally “mark up” their portion of the Democrats’ proposed $3.5 trillion Build Back Better Act today. All relevant House committees will offer their proposals in the coming weeks, which will then be combined and finalized by House Speaker Nancy Pelosi and other senior lawmakers. Next week, the tax-writing committee will consider key tax increases.
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Pelosi will be in Texas today, holding a press conference in Austin at 2:30 p.m. CT to highlight her health care priorities for the Build Back Better Act.
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President Biden has meetings at the White House today ahead of a trip to Louisiana to see firsthand damage from Hurricane Ida. At 11 a.m. ET today, Biden will deliver a speech on his administration’s response to the storm.
Top News
Apple to let media apps avoid 30% fee after global scrutiny [Bloomberg]
Judge conditionally approves Purdue Pharma opioid settlement [Bloomberg]
China orders Meituan, Didi to rectify misconduct by year-end [Bloomberg]
U.S. aviation agency probes Branson’s Virgin Galactic flight deviation [Reuters]
Yahoo Finance Highlights
AMC stock deserves to crash 87%: analyst
Nabisco worker calls for boycott of company’s snacks amid strike
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