August's M-PMI: More Stag & Less Flation

August's M-PMI provides confirmation of our economic outlook including a growth recession and moderating inflationary pressures. On balance, it should have been bullish for both bonds and stocks this morning, but the prices of both are down. That's because, today is the first day that the Fed is ramping up QT2, i.e., letting its balance sheet shrink by $95 billion per month.

The composite M-PMI index remained unchanged at 52.8 (chart below). It's major components also remained above 50.0: new orders (51.3 up from 48.0) production (50.4 down from 53.5), and employment 54.2 up from 49.9).