Economic Data Signal Caution

A tough time for economic data. The Eurozone continues soft, though a bit of a leveling could be developing with the labor market and consumer confidence is relatively stable. A bit of good news is that the Eurozone unemployment rate in September continued its six-year fall, reaching 7.4% from 7.5% in August. That’s basically on top of the 20-year low of 7.3% from 2007, and well off the 12.1% high of 2013. The German unemployment rate is down to 5%, well off the peak of 12.1% in 2005 and the lowest rate since unification (though stagnant for some six months).

For the United States, however, there was a significant miss from the ISM manufacturing PMI this morning — and that is a major issue. ISM printed at 47.8, a ten-year low. Matching the recent run of manufacturing payroll data, ISM employment in this sector also took a hit, with “growth in employment” down sharply. While the recent industrial production report had intimated a bit of a rebound in 3Q19, there doesn’t appear to be legs to it. Ominously, both employment (46.0), new orders (47.3) and exports (41.0) continue to ebb, pointing to further weakness likely in 4Q19. The non-farms payroll report consensus on Friday is looking for a rebound to 130,000 (was 96,000), but manufacturing is at just 3,000.

The Markit manufacturing PMI measure is not showing quite the same recent drop, but either way the message is clear that this sector is hurting and the longer it drags on the more it hurts the economic outlook.

ISM vs. Markit Manufacturing PMI

Source: Bloomberg and Voya Investment Management

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