Thursday, September 1, 2011

The Power of a Very Low Bar - ISM Manufacturing Comes in at 50.6 v 48.5

I wrote early in the week that the bar for both ISM Manufacturing and Employment data was very low.

Interestingly the ISM Manufacturing expectation is for contraction at 48.5? That's down from 50.9 in July.  Speaking of low bars.

Today we see that power in action - despite reporting a barely expansionary figure of 50.6 the market flew higher from a loss of 0.3% on the S&P 500 to a gain of 0.7% on the announcement.  It is definitely a have your cake, and eat it too market right now.  Minor good news is celebrated, and bad news means intervention.

This was the worst reading since July 2009, confirming what we saw overnight from Europe and China.

Under the surface, new orders were up marginally from last month but employment down. Prices continue to fall...


Full report here.

"The PMI registered 50.6 percent, a decrease of 0.3 percentage point from July, indicating expansion in the manufacturing sector for the 25th consecutive month, at a slightly slower rate. The Production Index registered 48.6 percent, indicating contraction for the first time since May of 2009, when it registered 45 percent. The New Orders and Backlog of Orders Indexes edged up slightly from July, but both indexes are indicating contraction in August at slower rates than in July. The rate of increase in prices slowed for the fourth consecutive month, dropping another 3.5 percentage points in August to 55.5 percent. The overall sentiment is one of concern and caution over the domestic and international economic environment, which is affecting customers' confidence and willingness to place orders, at least in the short term."

  • "Earlier chemical price increases are beginning to soften." (Chemical Products)
  • "Business is soft, confidence is down, and we are cutting inventory and expenses." (Machinery)
  • "Exports continue to be strong — domestic weak." (Computer & Electronic Products)
  • "Domestic sales are showing small improvements. International sales are showing larger improvements." (Fabricated Metal Products)
  • "Demand remains constant and strong." (Paper Products)
  • "Current headwinds in the national and international economic environment have increased uncertainty, and are affecting our customers' willingness to commit to high-dollar equipment purchases." (Transportation Equipment)
  • "We continue to post solid numbers, but the situation seems tenuous." (Plastics & Rubber Products)
  • "Automotive business (represents 52 percent of our sales portfolio) continues to be strong. Core business has pulled back slightly." (Apparel, Leather & Allied Products)
  • "Sales continue to be sluggish." (Furniture & Related Products)



PMI 50.6 50.9 -0.3 Growing Slower 25
New Orders 49.6 49.2 +0.4 Contracting Slower 2
Production 48.6 52.3 -3.7 Contracting From Growing 1
Employment 51.8 53.5 -1.7 Growing Slower 23
Supplier Deliveries 50.6 50.4 +0.2 Slowing Faster 27
Inventories 52.3 49.3 +3.0 Growing From Contracting 1
Customers' Inventories 46.5 44.0 +2.5 Too Low Slower 29
Prices 55.5 59.0 -3.5 Increasing Slower 26
Backlog of Orders 46.0 45.0 +1.0 Contracting Slower 3
Exports 50.5 54.0 -3.5 Growing Slower 26
Imports 55.5 53.5 +2.0 Growing Faster 24
OVERALL ECONOMY Growing Slower 27
Manufacturing Sector Growing Slower 25
*Number of months moving in current direction.

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