MACRO: US factory growth slows, however price pressures recede

The ISM Manufacturing PMI fell to 52.8 in July from 53 in the previous, topping analysts’ estimates of 52. New order rates continue to move lower although supplier deliveries rose and prices softened to levels not seen in two years. New orders (48 vs 49.2) and employment (49.9 vs 47.3) declined and production (53.5 vs 54.9) and supplier deliveries slowed (55.2 vs 57.3) while inventories rose faster (57.3 vs 56). Firms’ expectations regarding the outlook for output over the coming 12 months remained at their lowest since October 2020 amid inflation and supply chain concerns, as well as a gloomier global economic outlook, according to Institute for Supply Management

Today's reading pointed to the weakest rate of factory activity since June of 2020. Source: Bloomberg via ZeroHedge

However investors welcomed news that price pressures eased significantly (60 vs 78.5 - fourth largest decline on record). Earlier the S&P Global US Manufacturing PMI was revised slightly lower to 52.2 in July from a preliminary of 52.3,  and also showed that inflation softened recently. “Supply chain problems remain a major concern but have eased, taking some pressure off prices for a variety of inputs. This has fed through to the smallest rise in the price of goods leaving the factory gate seen for nearly one and a half years, the rate of inflation cooling sharply to add to signs that inflation has peaked" said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

As we mentioned in other posts, the Fed is now data dependent and today's data suggests that inflation may be abating, which supports upbeat moods on the markets. Nevertheless, the NFP report on Friday is the main event of the week and may provide some hints regarding Fed's next moves.