US University of Michigan consumer sentiment dropped sharply to 95.3 in August, down from 97.9 and missed expectation of 98.1. That’s also the lowest level since last September.

Some quotes from Surveys of Consumers chief economist, Richard Curtin:

• Decline concentrated among households in the bottom third of the income distribution
• The dominating weakness reflected much less favorable assessments of buying conditions, mainly due to less favorable perceptions of market prices.
• Consumers have become much more sensitive to even relatively low inflation rates than in past decades.
• Some price resistance has been neutralized by rising wages
• Falloff in favorable price perceptions has been much larger than ever before recorded.
• Overall, the data indicate that consumers have little tolerance for overshooting inflation targets, and to the benefit of the Fed, interest rates now play a more decisive role in purchase decisions.

Full release here.

US ISM Manufacturing Index rose to 59.3 in October, up from 55.4, way better than expectation of 55.6. The month-over-month gain of 3.9 pts is the second largest since May 2009. It’s also the highest reading since September 2018 while the overall economy has been in the sixth month in a row.

Looking at some details, new orders rose 7.7pts to 67.9. Production rose 2.0 pts to 63.0. Prices rose 2.7pts to 65.5. Employment rose 3.6 pts to 53.2, back in expansion.

“The past relationship between the Manufacturing PMI and the overall economy indicates that the Manufacturing PMI® for October (59.3 percent) corresponds to a 4.8-percent increase in real gross domestic product (GDP) on an annualized basis,” says Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

Full release here.

US PMI Manufacturing dropped from 52.0 to 49.9 in October, a 28-month low. PMI Services dropped from 49.3 to 46.6, a 2-month low. PMI Composite dropped from 49.5 to 47.3, a 2-month low.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“The US economic downturn gathered significant momentum in October, while confidence in the outlook also deteriorated sharply. The decline was led by a downward lurch in services activity, fuelled by the rising cost of living and tightening financial conditions. While output in manufacturing remains more resilient for now, October saw a steep drop in demand for goods, meaning current output is only being maintained by firms eating into backlogs of previously placed orders. Clearly this is unsustainable absent of a revival in demand, and it’s no surprise to see firms cutting back sharply on their input buying to prepare for lower output in coming months.

“One upside of this drop in input buying has been a further alleviation of supply constraints, which alongside the stronger dollar have helped cool price pressures in the manufacturing sector.

“Although price pressures picked up slightly in the service sector due to high food, energy and staff costs, as well as rising borrowing costs, increased competitive forces meant average prices charged for services grew at only a fractionally faster rate. Combined with the easing of price pressures in the goods-producing sector, this adds to evidence that consumer price inflation should cool in coming months.

“The surveys therefore present a picture of the economy at increased risk of contracting in the fourth quarter at the same time that inflationary pressures remain stubbornly high. However, there are clearly signs that weakening demand is helping to moderate the overall rate of inflation, which should continue to fall in the coming months, especially if interest rates continue to rise.”

Full release here.

US initial jobless claims dropped -10k to 206k in the week ending July 20, below expectation of 220k. Four-week moving average of initial claims dropped -5.75k to 213k.

Continuing claims dropped -13k to 1.676m in the week ending July 13. Four-week moving average of continuing claims dropped -4.5k to 1.697m.

Full release here.