Initial Guidance | 2 June 2016

US ISM Manufacturing Index ticked up to 50.8 in May, posting its third consecutive reading above the neutral 50 mark. The benchmark equates with growth, just barely, although Scott Brown, chief economist at Raymond James Financial, says “it’s an encouraging sign that things aren’t unraveling. Ultimately, production is going to increase because of stronger consumer demand.”
Markit’s US Manufacturing PMI, by contrast, eased in the revision for May, inching down to 50.7. Here, too, the implied growth for the sector is only fractionally above the stagnation level of 50. “For those looking for a rebound in the economy after the lacklustre start to the year, the deteriorating trend in manufacturing is not going to provide any comfort,” says Chris Williamson, chief economist at Markit.
US construction spending tumbled in April, posting the biggest monthly decline in more than five years. The weak data “could prompt economists to lower their second-quarter growth estimates,” according to Reuters.
The Atlanta Fed on Wednesday (June 1) lowered its estimate of Q2 GDP growth for the US to 2.5% from 2.9% in its revised GDPNow report. But that’s still a solid improvement over Q1’s tepid 0.8% gain (seasonally adjusted annual rate).
Gallup’s Job Creation Index for May increased to +33. “US workers’ reports of hiring activity at their place of employment are the most positive in Gallup’s eight-year trend,” the firm says. The index, which measures the percentage of workers who say their employer is hiring, is based on interviews last month with more than 18,000 adult workers who are employed full or part time.
The Fed’s June 1 release of its Beige Book report advises that “employment grew modestly since the last report, but tight labor markets were widely noted in most [Fed] districts.”