U.S. Manufacturing ISM Plunges

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.