Latest / Markets with Megan: A Quick Financial Markets Update / 30 Out of Last 32 Months in Contraction? | S2 E072 | 09-02-25

Transcript

30 Out of Last 32 Months in Contraction? | S2 E072 | 09-02-25 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: Every month.
• 0:01
  Megan Horneman: It's sort of a broken record when it comes to giving you guys information about the manufacturing sector here in the US.
• 0:06
  Megan Horneman: It's Tuesday, september 2nd, and this is Markets with Megan.
• 0:09
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• 0:12
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• 0:22
  Megan Horneman: Let's dig right into the manufacturing data that we received this morning and this is the ISM Manufacturing Index.
• 0:28
  Megan Horneman: It comes out typically the first day of every month.
• 0:30
  Megan Horneman: This is a broken record.
• 0:32
  Megan Horneman: We continue to see manufacturing here in the US in contraction territory.
• 0:37
  Megan Horneman: This index, with anything below a level of 50, insinuates that the economy is contracting, at least the manufacturing sector.
• 0:44
  Megan Horneman: This is nothing new.
• 0:45
  Megan Horneman: You're going to hear a lot of headlines about this is the sixth consecutive month.
• 0:49
  Megan Horneman: Obviously, when you look at the, if you go further into the data, you can see that this index has actually been below 50 for 30 out of the past 32 months.
• 0:59
  Megan Horneman: The only two months we saw it dip just slightly above 50.
• 1:04
  Megan Horneman: And we're talking about I think it was 50.3 one month, maybe 50.2.
• 1:08
  Megan Horneman: So really teetering on that brink of expansion and contraction.
• 1:12
  Megan Horneman: That was January and February of this month, and we all know that we did see some kind of front running when it came to the manufacturing data because of the concern around tariffs.
• 1:23
  Megan Horneman: So let's dig a little bit further into the details of this report.
• 1:27
  Megan Horneman: We saw the biggest declines in this index in prices paid, production, the backlog of orders, employment and then imports.
• 1:36
  Megan Horneman: So let's dig out the noise here and kind of explain what we're focused on.
• 1:40
  Megan Horneman: First of all, the production tends to be correlated with GDP.
• 1:45
  Megan Horneman: This isn't new.
• 1:46
  Megan Horneman: We've seen production weak in prior months.
• 1:49
  Megan Horneman: Even if you go back to May of this month, we were at 45.
• 1:52
  Megan Horneman: April we were at 44.
• 1:54
  Megan Horneman: We're now for the month of August, at a 47.8.
• 1:58
  Megan Horneman: So it's nothing new that manufacturing has been weak.
• 2:01
  Megan Horneman: Where we're concerned is the prices paid.
• 2:03
  Megan Horneman: Now you're going to see that the headlines will talk about prices paid falling a little bit lower.
• 2:09
  Megan Horneman: This is great news for the Fed.
• 2:11
  Megan Horneman: They could definitely cut interest rates.
• 2:12
  Megan Horneman: I just be careful here.
• 2:14
  Megan Horneman: This is what we typically try and tell you guys in these podcasts is what comes out in the news headlines and what's reality.
• 2:22
  Megan Horneman: And unfortunately this is still from a prices paid component.
• 2:27
  Megan Horneman: This part of the index is still very high.
• 2:29
  Megan Horneman: We did see it fall slightly in August, but you're looking at a level of 63.7.
• 2:35
  Megan Horneman: And we talked about how a level of 50 or above in all of these, in these different components of the index, mean it's expanding.
• 2:42
  Megan Horneman: So we're still seeing prices paid at a troublesome level.
• 2:45
  Megan Horneman: When it comes to inflation, there is a correlation here between manufacturing prices and inflation.
• 2:52
  Megan Horneman: So we'll be keeping a close eye on that, especially when we get the sister part of this index, which is the ISM services report later this week.
• 3:01
  Megan Horneman: Now, when we look at this report report later this week.
• 3:07
  Megan Horneman: Now, when we look at this report, because it has been so weak and we are not really a big export-driven economy this is something the Fed should keep an eye on that it does insinuate we have some weakness in the economy, but this isn't new.
• 3:16
  Megan Horneman: We've been contracting, as I mentioned, for almost three years now.
• 3:19
  Megan Horneman: This is a very busy week when it comes to economic data, so we'll be back with a lot more.
• 3:24
  Megan Horneman: We have the jobs report, which is extraordinarily important.
• 3:27
  Megan Horneman: This time around it's always important, but for this month it's the last employment and we will get some more information on the manufacturing and factory orders as well.
• 3:48
  Megan Horneman: If you want a history of our podcast, you can go to marketswithmeganfm.
• 3:53
  Megan Horneman: Thank you.