Latest / Markets with Megan: A Quick Financial Markets Update / Examining the Recent Slump in ISM Manufacturing Index | Epsiode 140 | 06-04-24

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Examining the Recent Slump in ISM Manufacturing Index | Epsiode 140 | 06-04-24 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: Well, the state of our manufacturing sector did not look too great in May.
• 0:04
  Megan Horneman: It is Tuesday, june 4th, and this is your regular segment of Markets with Megan.
• 0:09
  Megan Horneman: We're going to go over the economic data that we actually received yesterday, which is the gauge on the manufacturing sector.
• 0:15
  Megan Horneman: This is called the ISM Manufacturing Index.
• 0:18
  Megan Horneman: This is important because it typically comes out in the very beginning of each month and gives us an indication of the activity within the broad manufacturing sector.
• 0:27
  Megan Horneman: If this index comes in above 50, it means that the manufacturing sector is expanding.
• 0:33
  Megan Horneman: If it comes in below 50, it means that the manufacturing sector is contracting.
• 0:37
  Megan Horneman: Unfortunately, it turned back the other way by declining.
• 0:41
  Megan Horneman: It's now been in contraction territory for 18 out of the past 19 months.
• 0:47
  Megan Horneman: Some people also like to look at this as a recession indicator.
• 0:50
  Megan Horneman: This being down 18 out of the past 19 months is typically what you see in a recession.
• 0:56
  Megan Horneman: Let's look at some of the details, though.
• 0:58
  Megan Horneman: When you look at new orders, they also are deeply in contraction territory.
• 1:03
  Megan Horneman: They saw the biggest monthly drop since March of 2022.
• 1:09
  Megan Horneman: When you look at the prices paid component and this is important because the prices paid can be inflationary, so the markets tend to move on this instead of just the broad headline number.
• 1:19
  Megan Horneman: What we saw is that prices paid did drop in the month of May, but they were dropping from nearly a two-year high.
• 1:27
  Megan Horneman: What we saw in the month prior, and they still at 57, are in expansion territory, are still elevated, so inflation still is showing itself up here in the manufacturing side, employment.
• 1:45
  Megan Horneman: This was interesting because employment in manufacturing has been contracting for seven months now and it actually expanded for the first time in the month of May.
• 1:50
  Megan Horneman: So what does all this tell us?
• 1:52
  Megan Horneman: Basically, the economy is weakening.
• 1:54
  Megan Horneman: We know that Inflation is still a problem.
• 1:58
  Megan Horneman: It is improving on a lot of different metrics, but it's not improving enough, in our opinion, to be thinking that the Fed can cut rates in July, September.
• 2:07
  Megan Horneman: We even still think it might be more of a first quarter of 2025 story, and that's because the Fed's just not getting enough information on a consistent basis to say that inflation is completely behind us.
• 2:20
  Megan Horneman: That's all we have today.
• 2:21
  Megan Horneman: We'll have a bunch more this week.
• 2:23
  Megan Horneman: We'll get the ISM Services Index.
• 2:25
  Megan Horneman: That's important because that's where we spend the majority of our money on the service sector, and that inflation side is something we'll pay close attention to, because the Fed has made comments on how service inflation is sticky, and then we'll round out the week with the unemployment report.
• 2:40
  Megan Horneman: That's all we have.
• 2:41
  Megan Horneman: If you have any questions or comments, please feel free to reach out to podcasts at Verdence.
• 2:45
  Megan Horneman: com.
• 2:45
  Megan Horneman: Thank you.