Global Manufacturing Reports: US, Europe, China, and Japan
(Continued from Prior Part)
US reports eased industrial sector growth in August
The Industrial Select Sector SPDR ETF (XLI), which tracks the industrial sector in the United States (SPY), is down 7.50% over the past month as of September 1, 2015. The ETF has lost 11.75% since the beginning of the year, as the appreciating US dollar (UUP) continues to weigh down the US industrial sector. Consequently, the final reading for August’s US Manufacturing PMI (Purchasing Managers’ Index) indicated easing in US business conditions, making investors betting on US industrial sector growth wary of their holdings.
US industrial-sector companies Joy Global (JOY), General Electric (GE), and Honeywell International (HON) fell 7.93%, 3.79%, and 3.33%, respectively, at the close of September 1 trading. JOY, GE, and HON have yielded -52.06%, -5.50%, and -3.96% year-to-date.
August PMI final report
The key points from the US August PMI final report include the following:
- August data point to easing of business conditions from July’s slight rebound.
- Output, new orders, and employment all expanded at a slower pace.
- Export orders fell, continuing their downtrend.
- The strengthening dollar continues to weigh down manufacturing growth in the United States.
- Lack of adequate demand from countries such as China and Europe continues to restrict export orders.
On September 1, Markit Economics reported the final reading for August’s US Manufacturing PMI at 53.0 index points, down from 53.8 recorded in July. July’s reading was a rebound from June’s 20-month low, while August’s reading indicates business conditions easing in the United States to their 22-month low. The index is comfortably above the neutral level of 50.0 but below the post-recovery average of 54.3.
Manufacturing is stuck in low gear in the United States
The dollar’s appreciation is hurting the export competitiveness of industrial goods manufactured in the United States. For more information, please read US Industrial Sector Hit Hard by Currency Wars.
According to the report, “August’s survey highlights that the U.S. manufacturing sector continues to struggle under the weight of the strong dollar and heightened global economic uncertainty, but resilient domestic spending and subdued cost pressures are keeping the recovery on track.”
While the strengthening dollar is hurting US exports, it’s benefiting Canadian exporters. We’ll discuss the Canadian Manufacturing PMI report in the next part of this series.
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