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Tuesday August 3, 2021

A “spike” in economic activity sounds scarier than it actually is

For some time now, economists and policy makers have envisioned a spike in economic growth in the United States.

And manufacturing activity data released on Monday suggests the time may be right – unless you look beyond the numbers.

The Institute for Supply Management’s Manufacturing Purchasing Managers Index (PMI) released on Monday posted a July reading of 59.5, down from the June reading of 60.6. These data show that the manufacturing sector grew last month, but at a slower pace.

Any reading above 50 indicates that the sector is growing while readings below 50 represent a contraction. The report also marked the third consecutive month that the ISM’s manufacturing PMI fell, after peaking at 64.7 in March.

But the overall index ignores what the internals of this data clearly show, which is that demand continues to overwhelm the supply side of the economy.

“The ISM Manufacturing PMI was very solid in the details,” said Neil Dutta, head of economics at Renaissance Macro Research. “Anyone who says otherwise does not know what he is doing.”

In other words, debating whether the economy has reached, is approaching, or exceeded its time of “maximum growth” for this economic recovery does not help us understand what these data are telling us. Companies cannot produce enough to meet customer orders and stocks are reduced to fill the void.

“Business Inquiry Committee panelists reported that their businesses and suppliers continue to struggle to meet increasing levels of demand,” said Timothy Fiore, chair of the Business Manufacturing Company Inquiry Committee. ISM.

“As we enter the third quarter, all segments of the manufacturing economy are affected by near-record raw material delivery times, continued shortages of critical raw materials, rising raw material prices and difficulties in product transport, ”Fiore added.

“Worker absenteeism, short-term closures due to parts shortages and difficulties in filling vacancies continue to be issues limiting the growth potential of manufacturing,” he wrote.

As a business contact at the ISM put it: “Activity levels continue to show strong demand, with no signs of abating. Moreover, IHS Markit data released on Monday indicates that manufacturing activity grew at a faster pace in the United States last month, with the index reaching an all-time high.

Michael Pearce, senior US economist at Capital Economics, said Monday that the details of the ISM report “suggest that supply constraints, while still severe, are now starting to ease.”

“While the comments section again reflected widespread supply issues and cost increases, the supplier lead time index actually fell to 72.5 from 75.1,” Pearce wrote, “and the price paid index fell to 85.7 from 92.1, the latter also reflecting recent declines in commodity prices” (note that the June price paid index was used as a record for the ISM series).

So while an overall spike in the data may appear to emerge from either leading data or slightly declining sub-indices, there is no doubt that a demand-driven recovery that has overwhelmed global suppliers is continuing at a rapid pace. supported.

And as this recovery progresses, economic data repeatedly reveals that the ‘on / off’ switch we hoped to flip in the spring as COVID vaccines were rolled out and economic restrictions were lifted was not working. also easy.

By Myles Udland, journalist and presenter for Yahoo Finance Live. Follow him on @MylesUdland

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What to watch today

Economy

  • 10:00 am ET: Factory orders, June (1.0% expected, 1.7% in May)

  • 10:00 am ET: Durable goods orders, June final (0.8% expected, 0.8% in previous impression)

  • 10:00 am ET: Orders of non-defense capital goods excluding aircraft, June final (0.5% in previous impression)

  • 10:00 am ET: Non-military capital shipments excluding aircraft, June final (0.6% in previous impression)

Earnings

Pre-marketing

  • 6:25 a.m. ET: Eli Lilly (THERE IS) Expected to Report Adjusted Earnings of $ 1.89 per Share on Revenue of $ 6.61 Billion

  • 6:30 a.m.ET: Clorox (CLX) Expected to Report Adjusted Earnings of $ 1.32 per Share on Revenue of $ 1.91 Billion

  • 6:50 a.m. ET: KKR & Cie (KKR) Expected to Report Adjusted Earnings of 86 cents per Share on Revenue of $ 1.47 Billion

  • 6:55 a.m. ET: Under protection (UAA) Expected to Report Adjusted Earnings of 6 cents a Share on Revenue of $ 1.22 Billion

  • 7:00 am ET: ConocoPhillips (COP) Expected to Report Adjusted Earnings of $ 1.13 per Share on Revenue of $ 10.24 Billion

  • 7:00 am ET: Marriott International (TUE) Expected to Report Adjusted Earnings of 47 cents a Share on Revenue of $ 3.16 Billion

  • 7:00 am ET: Discovery (DISCA) Expected to Report Adjusted Earnings of 85 cents a Share on Revenue of $ 2.98 Billion

  • 7:30 a.m. ET: Warner Music Group (WMG) Expected to Report Adjusted Earnings of 15 cents per Share on Revenue of $ 1.19 Billion

  • 8:00 a.m.ET: Ralph Lauren (RL) Expected to Report Adjusted Earnings of 87 cents a Share on Revenue of $ 1.22 Billion

  • 8:00 a.m.ET: SolarWinds Corp. (SWI) expected to report adjusted earnings of 21 cents per share on revenue of $ 258 million

  • 8:30 a.m. ET: Nicolas (NKLA) should report adjusted losses of 30 cents per share on income of $ 100,000

Post market

  • 4 p.m. ET: Devon Energy Corp (DVN) Expected to Report Adjusted Earnings of 52 cents a Share on Revenue of $ 2.24 Billion

  • 4 p.m. ET: Caesars Entertainment (CZR) Expected to Report Adjusted Losses of 4 cents a Share on Revenue of $ 2.39 Billion

  • 4 p.m. ET: Budget Opinion Group (AUTO) Expected to Report Adjusted Earnings of $ 2.84 per Share on Revenue of $ 2.1 Billion

  • 4 p.m. ET: Amgen (AMGN) Expected to Report Adjusted Earnings of $ 4.09 per Share on Revenue of $ 6.45 Billion

  • 4:05 p.m. ET: Akamai (AKAM) Expected to Report Adjusted Earnings of $ 1.39 per Share on Revenue of $ 846 Million

  • 4:05 p.m. ET: Activision Blizzard (ATVI) Expected to Report Adjusted Earnings of 75 cents a Share on Revenue of $ 1.89 Billion

  • 4:05 p.m. ET: Nation Entertainment Live (LYV) Expected to Report Adjusted Losses of $ 1.18 per Share on Revenue of $ 527.5 Million

  • 4:05 p.m. ET: Lyft (LYFT) Expected to Report Adjusted Losses of 22 cents per Share on Revenue of $ 700.73 Million

  • 4:10 p.m. ET: Coursera (COURT) Expected to Report Adjusted Losses of 11 cents per Share on Revenue of $ 91.53 Million

  • 4:10 p.m. ET: Match group (MTCH) Expected to Report Adjusted Earnings of 51 cents per Share on Revenue of $ 691 Million

  • 4:15 p.m. ET: Western Oil (OXY) expected to break even on a revenue adjusted basis of $ 5.86 billion

Top news

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BP Increases Dividend, Announces $ 1.4 Billion Buyout As Profits Recover [Yahoo Finance UK]

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Take-Two beats high and low, but second quarter revenue forecast falls short [Yahoo Finance]

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