Don’t get too excited, says ISM |
Tuesday saw the release of S&P Global’s strongly positive report on U.S. manufacturing output and business conditions. The ISM’s Manufacturing PMI was not so rosy: Its headline index rose modestly to 48.7 in August from July’s 48.0, lingering below the no-change mark of 50. Production was down 3.6 points to a contractionary 47.8. Yet there were similarities with the S&P report: Prices continued their growth for the 11th straight month (albeit at a slightly slower pace), while new orders (the index for which rose 4.3 points to 51.4) climbed out of the red.
This gloom was echoed in respondents’ comments to the ISM’s survey, which did not spare the rod concerning tariffs. One anonymous manufacturer of transportation equipment summed up the state of their market bluntly: “The trucking industry continues to contract. Our backlog continues to shrink as customers continue to hold off on buying new equipment. This current environment is much worse than the Great Recession of 2008-09. There is absolutely no activity in the transportation equipment industry. This is 100 percent attributable to current tariff policy and the uncertainty it has created. We are also in stagflation: Prices are up due to material tariffs, but volume is way off.”
The divergence between the S&P’s and the ISM’s view of events suggests that manufacturing may boost third- and even fourth-quarter GDP. Tariff-driven cost pressures and uncertainty, however, could further squeeze carrier margins and soften truckload volumes, particularly in flatbed and dry van segments tied to construction and durables. |
