Manufacturing and the consumer flip-flop

FRI, AUG 30, 2019

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

AS OF FRI, AUG 30, 2019 • 12:04 ET

DJIA		26366.01
		+0.01%	+3.76

S&P 500		2922.34
		-0.08%	-2.24

NASDAQ		7942.00
		-0.39%	-31.39

EDITOR'S NOTE

Wait wait wait...manufacturing is supposed to be weak and the consumer is supposed to be super strong right now.

But this morning, they traded places.

The Chicago PMI--a regional manufacturing survey that "previews" the national ISM number out next week--rebounded back into expansion territory today with a 50.4 reading for August, a six-point jump from July's three-and-a-half year low.

A sustained rebound in these surveys--which have been the weakest part of the economy and one of the biggest worries for the market--would be a hugely hopeful sign.

But--but!! Just minutes later, the final University of Michigan consumer sentiment survey was released to a revised lower 89.8 for August--the worst reading since mid-2016, and the biggest monthly drop since December 2012.

And since the consumer is holding up incredibly well right now and is vastly larger than the manufacturing sector, any sign that weakness is being transferred from the factory sector to the consumer is enough to make investors weak in the knees.

Sure enough, the Dow has given up most of its gains this morning. But again, we're in one of those landscapes where bad news can be good news if it means more Fed rate cuts are coming.

It's way too early to extrapolate a bad monthly consumer sentiment reading into a larger slowdown story, especially because the consumer is so strong that the data can barely keep up (i.e. the GDP report yesterday, the PCE numbers this morning). Do you remember that December 2012 UMich sentiment drop?? Yeah, nobody does.

Have a GREAT Labor Day weekend--but first, I'll see you at 1 p.m.!

Kelly

Kelly Evans
@KellyCNBC

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