LIVE MARKETS-PMI fight!

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PMI FIGHT!

On Monday, investors embarked on a new month with a double-dose of contradictory factory data.

Are goods makers in expansion or contraction? Depends on who you ask.

The Institute for Supply Management's (ISM) purchasing managers' index (PMI) USPMI=ECI showed the contraction of activity at U.S. factories unexpectedly accelerated in November.

The index shed 0.5 points to land at 48.2, contradicting analysts who expected a 0.3 point move in the opposite direction.

ISM's manufacturing PMI now sits 1.8 points below the magic PMI level of 50, the dividing line between monthly contraction and expansion.

Wandering into the weeds, new orders and employment deteriorated, but production crossed back into expansion territory. Prices paid - an inflation predictor - heated up by 0.5 points to an elevated 58.5. But the component remains well below its April zenith of 69.8.

"Higher prices and general uncertainty surrounding trade policy remain the two consistently cited grievances from manufacturers," writes Matthew Martin, senior U.S. economist at Oxford Economics. "Firms are concentrated on managing head count and reducing overhead costs, with a noticeable shift towards the use of layoffs in addition to attrition."

Commentary from ISM's survey participants is littered throughout with phrases like "trade confusion," "tariffs and economic uncertainty," "business conditions remain soft as a result of higher costs from tariffs" and "unstable markets (have) made pricing fluctuate in a very volatile way."

But not so fast.

S&P Global also had its say, with its final take on November manufacturing PMI USMPMF=ECI, which printed at 52.2, a slight improvement over its initial "flash" reading of 51.9, but 0.3 points weaker than October's final take.

But Chris Williamson, S&P Global's chief business economist, suggests we hold off on popping the champagne cork just yet.

"Although the headline PMI signalled a further expansion of factory activity in November, the health of the U.S. manufacturing sector gets more worrying the more you scratch under the surface," Williamson writes. "Manufacturers are making more goods but often not finding buyers for these products."

"Profit margins are meanwhile coming under pressure from a combination of disappointing sales, stiff competition and rising input costs, the latter widely linked to tariffs," he adds.

The S&P Global and ISM indexes differ from each other in the weight they apply to the various components (new orders, employment, etc).

Here's how closely they agree (or not). The dueling PMIs are set to meet again on Wednesday, when they spar over the services side of the coin.

(Stephen Culp)

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