U.S. private sector growth eases to seven-month low in April

One of the main factors which let the US to secure its position as #1 world economy is continuously pursued policy to attract the top talents. This policy was in place almost throughout the entire history of the United States. Because before we would have the best technology, infrastructure, network of efficient suppliers or the most progressive legislation, we shall be able to generate the best ideas. And ideas belong to people.

Donald Trump’s policies of isolationism and protectionism are in direct opposition with the history of the country he is now leading.

The main driver of the economy is trade. It is logical that measures aimed to limit free trade cannot stimulate the economy.

Trump’s complete lack of knowledge regarding international politics as well as the level of its complexity, has already produced negative outcome. His constantly contradicting statements of false statements have created unprecedented level of uncertainty. As we know, business and uncertainties are not friends.

His immigration policies already affected the housing sector. it remains constrained by a range of problems including shortages of labour and land as well as rising material prices.

Reforms on H-1B visa will hit high-tech companies soon and, most likely, will lead to a negative impact on the U.S. competitiveness in the long run.

I believe that this is another signal that highlights potential outcome of Trump’s policies.

FX

At 52.7 in April, down from 53.0 in March, the seasonally adjusted Markit Flash U.S. Composite PMI Output Index signaled a further slowdown in private sector output growth, reported Markit on Friday. The latest reading pointed to the weakest rate of expansion since September 2016.

The moderation in private sector growth reflected a loss of momentum in both the service economy (‘flash’ index at 52.5 in April) as well as the manufacturing sector (‘flash’ index at 53.4).

Key findings:

  • Flash U.S. Composite Output Index at 52.7 (53.0 in March). 7-month low.
  • Flash U.S. Services Business Activity Index at 52.5 (52.8 in March). 7-month low.
  • Flash U.S. Manufacturing PMI at 52.8 (53.3 in March). 7-month low.
  • Flash U.S. Manufacturing Output Index at 53.4 (54.3 in March), 7-month low

IHS

USMI1

The moderation in private sector growth reflected a loss of momentum in both the service economy (‘flash’ index at 52.5 in April) as well as the manufacturing sector (‘flash’ index at 53.4).

April data also revealed the weakest rise in private sector payroll numbers since February 2010, driven by a softer pace of staff hiring among service providers.

There were signs of a squeeze on operating margins in April, as input price inflation reached its strongest since June 2015. At the same time, prices charged by U.S. private sector firms increased only marginally and at the slowest pace since November 2016. 

Subdued demand growth and lower volumes of incomplete work acted as a brake on staff hiring in April.

Manufacturing growth outpaced the trend recorded across the service economy in April, but was also the slowest seen since September 2016.
April data signalled a sharp and accelerated rise in average cost burdens across the manufacturing sector. The rate of input cost inflation was the fastest since December 2013, which survey respondents linked to rising commodity prices (particularly metals). Meanwhile, pressure on margins from higher input costs contributed to the strongest increase in factory gate charges for almost two-and-a-half years.
USMI
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said that the PMI data suggest the US economy lost further momentum at the start of the second quarter.
The surveys are signalling a GDP growth rate of 1.1% after 1.7% in the first quarter. The vast services economy saw the weakest monthly expansion for seven months and the manufacturing sector showed signs of growth slowing further from the two-year high seen at the start of the year, despite export orders lifting higher.
The labour market also continued to soften. The surveys signalled a marked step-down in the pace of hiring in March which has continued into April. 
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The rule of logic suggests that, so far, the implementation of Trump’s policies has not produced positive outcome. Therefore, I assume that it is reasonable to question for how long this trend will last and whether we shall expect further deterioration?
If yes, it would mean that the industry’s hope that recovery of crude oil prices is just behind the corner might not be realistic.
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