Manufacturing Surveys Finally Peak?

The chart below shows the PMI for each economy (minus 50) weighted by GDP in USD. Manufacturing PMIs as a whole ticked lower in June for the first time since April 2020. Diminishing sentiment has been broadly expected after such a consistent rebound and, heck, PMIs are oscillators. 

Additionally, supplier delivery times measured via US manufacturing surveys finally ticked lower in June for the first time since November 2020. You will likely need to squint in order to see the very minor retreat! Nonetheless, a peak in delivery times in May would suggest a short countdown to mean reversion, which on average takes ~10 months. All in all, the average z-score below should reach zero by approximately March 2022. Be aware delivery times have quickly dissipated following past similar extremes. 

Prices paid as measured via US manufacturing surveys have also ticked lower a whole. The ISM print on Thursday reached its highest since 1979, but additional surveys strongly hint a peak is in the works. 

As an aside, remember prices paid surveys have historically been very poor predictors of impending inflation. The survey results are sadly mostly a coincidental to lagged feature of realized producer prices inflation. 

The scatterplot below shows the relationship between prices paid surveys (z-scores) versus the change 24 months ahead in PPI YoY. Extremely high prices paid have habitually been followed by tumbling producer prices. 

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