The US ISM Manufacturing index for July recorded 48.0, below the estimate of 49.5. This is a decrease from the previous month’s figure of 49.0.<\/p>\n
Prices paid were 64.8, lower than the expected 70.0. Employment dropped to 43.4 compared to 45.0 last month.<\/p>\n
New orders increased slightly to 47.1 from 46.4 in the previous month. Production improved to 51.4 from 50.3 last month.<\/p>\n
Supplier deliveries fell to 49.3, down from 54.2 last month. Inventories slightly decreased to 48.9 from 49.2 last month.<\/p>\n
Customers’ inventories decreased to 45.7 from 46.7 last month. The backlog of orders increased to 46.8 from 44.3 in the previous month.<\/p>\n
New exports were slightly down at 46.1, compared to 46.3 last month. Imports rose to 47.6 from 47.4 last month.<\/p>\n
Both production and prices paid were the only components above the 50.0 level. Other components remained below this threshold.<\/p>\n
The July ISM manufacturing report has come in weaker than expected at 48.0, confirming the sector is in contraction. This is the ninth consecutive month we have seen the index below the 50.0 threshold, a pattern historically associated with economic slowdowns. Our immediate focus shifts to defensive positioning, as this data increases the probability of a broader economic cooling.<\/p>\n
The significant drop in the Prices Paid component to 64.8 is a crucial detail, suggesting inflationary pressures are easing faster than anticipated. We are now seeing the market price in a higher probability of a Fed rate cut before the end of 2025, with fed funds futures adjusting immediately after the release. Traders should consider positions that benefit from falling short-term interest rates, as this report gives the Federal Reserve more room to ease policy.<\/p>\n
The sharp fall in the employment number to 43.4 is a major red flag for the upcoming Non-Farm Payrolls report. This weakness in the labor market outlook puts pressure on corporate earnings expectations, making call options on cyclical sectors like industrials and materials less attractive. We expect market volatility to rise, with the VIX index already jumping from 14 to over 16, and purchasing protection through put options on broad market indices could be a prudent strategy.<\/p>\n
Following the data, we observed the US dollar index falling as expectations for future rate hikes diminished relative to other central banks. Simultaneously, yields on the 2-year Treasury note, which is highly sensitive to Fed policy, dropped by over 10 basis points to 4.75% as investors sought safety. This environment suggests opportunities in trading currency pairs against the dollar, and for bond traders, it reinforces a bullish stance on government debt.<\/p>\n
We must also note the internal divergences within the report, such as the rise in production to 51.4. This suggests that while new demand is weak, some manufacturers are still working through the significant order backlogs built up during the 2023-2024 period. This could create short-term noise, but the trajectory of new orders and employment remains the dominant and more forward-looking indicator for our strategy.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" US manufacturing index falls to 48.0; production up, prices paid decline, employment and orders remain weak.<\/p>\n","protected":false},"author":62,"featured_media":17028,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-27946","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/27946","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=27946"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/27946\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/17028"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=27946"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=27946"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=27946"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}