PMI (Purchasing Manager’s Index) suggests a robust economy with a few cracks

The latest PMI through early October painted the US economy growing at 2.5%, following an equally resilient growth in Q3. The measures came in at 55.2 on services and 52.2 on manufacturing, anything above 50 signifies growth and below 50 contraction.

Clearly the economy seems to be in fine fettle after a few months of tariffs. But simmering under the surface are some dark undercurrents, largely spelling uncertainty.

Here is S&P Global's Chris Williamson with some color:

Business confidence in the outlook for the coming year has deteriorated further, and is at one of the lowest levels seen over the past three years as companies worry about the impact of policies, most notably tariffs, and an unprecedented rise in unsold stock among US exporters on the factory side of the economy.

American manufacturers are sitting on unsold inventories, bought from-running tariffs are now discovering that demand for their final products is lacking, and many producers are unable to pass those tariffs costs along.

Sep PMIS&P Global saw that that the average selling price inflation was the coolest in six months amid competition for scarce buyers. That dynamic, perhaps explains the absence of tariff-related price pressure in September’s somewhat benign CPI report released by the BLS .

It looks good for now but there are a few cracks likely to emerge.