US S&P Global Manufacturing PMI slumps to 49.5, Services PMI improves to 56 in July

S&P Global US PMI Composite Output Index rose from 54.8 in June to 55.0 in July, its highest since April 2022. Output has now risen continually over the past one-and-a-half-years, with the pace of expansion having improved markedly in recent months after slowing in April. Employment rose for a second successive month, pointing to a further modest labor market improvement after headcounts fell briefly in the two months to May. Optimism about output in the year ahead slipped to a three-month low in July. Sentiment was adversely affected by uncertainty regarding the Presidential Election and resulting policies. Companies also cited concerns over the persistent high cost of living in relation to both inflation and interest rates. The service sector outperformed manufacturing for a fourth straight month, with the sectoral divergence widening to the greatest since June of last year. US Services Business Activity Index stood at 56.0, compared to 55.3 in June, a 28-month high.

On the other hand, the S&P Global US Manufacturing PMI fell from 51.6 in June to 49.5 in July, signaling a deterioration in business conditions within the goods-producing sector for the first time since December. Falls in new orders, production and inventories contributed to the decline in the PMI. A reduced rate of employment growth also acted as a drag on the PMI. In terms of the US stock market, the S&P 500 was dragged down by the big technology companies, plunging 2.3% to end a streak of 17 months without a drop of 2% or more. We expect the S&P 500 index to fluctuate between points 5,500 – 5,700 in the near term.

In terms of industries, American consumption is still very solid, and investors can pay attention to relative stocks with impressive performance.

Colgate-Palmolive(CL.US)’s focus on high-quality operating performance continued to deliver in 2Q24, with strong growth in net sales, gross profit, operating profit and net profit. Net sales amounted to US$5.1 billion in Q2, representing 4.9% YoY growth. Volume grew 4.7% in the quarter, an improvement from 1.3% volume growth in 1Q24, driven by a return to volume growth at Hill’s and in Asia-Pacific and sequential improvement in North America, Africa/Eurasia and Europe. On a category basis, volume growth was led by oral care, while home care and personal care delivered mid-single-digit volume growth in Q2. Pet nutrition delivered 2.5% volume growth in the quarter. Pricing was up 4.2%, with positive pricing across five of six divisions.

GPM in Q2 was up 280 basis points YoY to 60.6%. As per the Mgt, the benefits from revenue growth management and continued strength of the funding-the-growth initiatives, the company continued to expect gross profit margin expansion for the year. It is recommended to buy at US$96.50, target at US$112.50, and stop loss at US$92.50.

Unilever (UL.US)’s sales in H1 was up 4.1% YoY, led by volume of 2.6% and price of 1.6%. Unilever delivered the third consecutive quarter of improving volume growth, with volume up 2.9% in Q2, increasing from 2.2% in Q1 and 1.8% in Q4 2023. Four of the five business groups delivered positive volume growth in Q2.

The sales in emerging markets (59% of Group turnover) grew 5.1% YoY, with 3.8% from volume and 1.3% from prices. India market grew 1.2%, with stronger volumes partially offset by price. Latin America grew 8.8%, with continued strong volume growth across the region. Africa and Turkey delivered broad-based, double-digit growth. Growth in South East Asia was adversely impacted by a sales decline of 5.7% in Indonesia. China declined by mid single-digit, due to market weakness across all categories apart from food services. Developed markets (41% of Group turnover) grew underlying sales by 2.8% with 0.8% from volume and 2.0% from prices. The return to positive volume growth reflected a continued resilient performance in North America and a marked volume improvement in Europe. It is recommended to buy at US$59.00, target at US$68.50, and stop loss at US$56.50.