Wednesday, June 1, 2011

U.S. Manufacturing ISM Plunges

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The one stalwart of the domestic the past two years has been the shrunken manufacturing industry.  However, last month it began to show a slowdown - which consistent with what we are seeing worldwide, accelerated recently as ISM just reported a 53.5 print, versus expectations of 57.1.  To put it into perspective last month was a reading of 60.4.  This is the worst print in over a year and a half.   Of course any figure over 50 is expansionary but this type of slowdown is quite significant.

Looks like higher oil prices, the Chinese slowdown, and "Japan" are really putting a dent in world growth.

Somewhere Ben Bernanke must be sweating.... and my call for QE3 this late fall/winter is gaining strength. [May 19, 2011: Prepare for a Fed Hike.... in 2018? So Says Goldman Sachs] (although it will most likely hurt the economy further)

On the positive side - prices fell sharply.

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From the respondents:
  • "Chemical prices are under increasing cost pressure, driven by feedstock and transportation costs." (Chemical Products)
  • "Continued growth through beginning of second quarter, with strong backlog and outlook for at least the next three months." (Electrical Equipment, Appliances & Components)
  • "Business levels remain strong — better than last year by 20+ percent, but not back to 2008 or early 2009 levels." (Fabricated Metal Products)
  • "Demand remains strong; however, inflation is evident everywhere in virtually every material purchased." (Paper Products)
  • "Bad weather is impacting retail business." (Printing & Related Support Activities)
  • "Business is still strong, but we are more aware of a possible softening than previously." (Machinery)


MANUFACTURING AT A GLANCE
MAY 2011


Index
Series
Index
May
Series
Index
April
Percentage
Point
Change


Direction
Rate
of
Change

Trend*
(Months)
PMI 53.5 60.4 -6.9 Growing Slower 22
New Orders 51.0 61.7 -10.7 Growing Slower 23
Production 54.0 63.8 -9.8 Growing Slower 24
Employment 58.2 62.7 -4.5 Growing Slower 20
Supplier Deliveries 55.7 60.2 -4.5 Slowing Slower 24
Inventories 48.7 53.6 -4.9 Contracting From Growing 1
Customers' Inventories 39.5 40.5 -1.0 Too Low Faster 26
Prices 76.5 85.5 -9.0 Increasing Slower 23
Backlog of Orders 50.5 61.0 -10.5 Growing Slower 5
Exports 55.0 62.0 -7.0 Growing Slower 23
Imports 54.5 55.5 -1.0 Growing Slower 21
OVERALL ECONOMY Growing Slower 24
Manufacturing Sector Growing Slower 22
*Number of months moving in current direction.

Full data.


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