Chicago PMI Misses, Survey Respondent: "Companies That Are Very Profitable Still Behaving As If Bankruptcy Is Around The Corner"

Tyler Durden's picture

While the miss in the April Chicago PMI was just as we predicted, with the final read of 67.6 below "expert" expectations of 68.2, and down from a near record 70.6, it seems that the full pain will only be felt yet. The reason: "In response to special questions about the Japanese disaster, panelists reported minimal impact." They will. Guaranteed. Which means that upcoming weakness is simply deferred from April to May or later, pushing back the "imminent" rebound further into the future, yet guaranteeing a major miss in Q2 GDP. Our call continues to be for a Q2 GDP of at or below 2%. Yet the most insight as usual comes from the survey respondents, where we find this pearl of wisdom which probably explains everything that is wrong with the economy: "Companies that are very profitable still behaving as if bankruptcy is around the corner". And why wouldn't they: when in the history of human events has central planning every worked?

Among the changes, the bulk of which were declines: Production declined from 74.2 to 70.0, New orders dropped from 74.5 to 66.3, Backlogs dropped from 69.6 to 62.4, Inventories dropped from 60.5 to 53.5, Employment dropped from 65.6 to 63.7, Prices Paid declined from 83.4 to 81.8, buying policy plunged from 37.8 to 27.4, and Capital Equipment dropped from 120.6 to 102.4.

From the release:

Business Activity:

  • NEW ORDERS and ORDER BACKLOGS eased following historic highs early in the year;
  • Breadth of EMPLOYMENT expansion relaxed from a 27-year high.


  • Lead times reported for PRODUCTION MATERIEL and CAPITAL EQUIPMENT decreased while lead times for MRO SUPPLIES remained firm.

Survey responses:

1.    Companies still skittish and intense pressure from boards / stock market. Companies that are very profitable still behaving as if bankruptcy is around the corner.
2.    We are continually finding and hiring qualified new employees. We are also adding new equipment. The backlog is now over our levels prior to the recession.
3.    It appears suppliers are finding more creative ways to institute price increases with the most recent being ---unprecedented surcharges.
4.    Prices on plastic resin and cotton continue to press suppliers to the point where they are increasing prices or refusing business - first time I've seen this in years.
5.    First price increase to customers due to the commodity pressure on steel, copper and aluminum.
6.    Due to our company using products with an asphalt base, we expect to see continued increases throughout the construction season.
7.    All costs are increasing. Chemical costs are at recent time highs.

8.    Capacity issues at suppliers were exacerbated by the tragic events that unfolded in Japan.
Much concern regarding our ability to grow as the limited availability of many raw materials propagates. Inadequate capacity at the feedstock levels of most concern due to the lengthy and expensive work required to ramp it up. This bottleneck causes obvious issues throughout the entire supply chain. A couple of years of constrained growth could be good in the long term but can also cause panic in sectors already straining to stay afloat while hoping for a sustained economic recovery.
9.    Commercial Banking activity is picking up. Commercial Real Estate valuations stabilizing. 10. ?New orders fell slightly this month but hopefully we can get some of the backlog through engineering. Quote requests continue strong.

11. Where did all the orders come from?

12. Finished the 1st quarter ahead of plan. Have our fingers crossed for the second quarter.

13. Record month in March.

14. The economy in our markets are still hot!?

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Ruffcut's picture

Maybe a little birdy told them to hoard some cash.

slewie the pi-rat's picture

PMI/pms = bear mkt, BiCHeZ!

Dick Darlington's picture
  • Breadth of EMPLOYMENT expansion relaxed from a 27-year high.
  • This one never gets old. Expansion, lol. 27-year high, loool! It's more like someone has been high for 27-years.

    101 years and counting's picture

    UE in the midwest higher than national average, yet employment for the PMI is highest in 27 years.  Seriously, who is dumb enough to believe that giant load of BS (other than the retards anchoring CNBC)?

    dcb's picture

    don't believe you are reading correctly, rate of expansion can be at 27 year high but then now decreased. not sure the miss was so awful overall!!

    Oh regional Indian's picture

    Most companies in the Supply Side paradigm are bankrupt, regardless of what their FASB approved cook-books might say.

    It's a good thing they are acting bankrupt, closer to reality.

    PMI missed, PM doesn't.


    SofaPapa's picture

    "And why wouldn't they: when in the history of human events has central planning every worked?"


    This statement provides a perfect moniker for the past three years.  All the rest that you have written (which is great) just fills in the details.

    Long-John-Silver's picture

    Everyone with any common sense can see the collapse coming. It's like a train wreck in progress and there's not a damn thing you can do about it except run away.

    cherry picker's picture

    Only thing is, where you going to run to?

    Everyone is in the same mess if not worse, only some are better at hiding it.

    Long-John-Silver's picture

    My shelter stocked with food, copper clad lead, Gold, and Silver.

    mynhair's picture

    Don't bet against the window dressing.

    Long-John-Silver's picture

    The window dressing is burning.

    slaughterer's picture

    Ah, the month-end window dressing.  Where do we see it most today?

    Clorox Cowboy's picture

    Wake me up at T minus 1 month...

    mayhem_korner's picture

    I'm setting your alarm clock for Memorial Day...

    Re-Discovery's picture

     Bankruptcy?  What's Bankruptcy?  Damn these 'Companies!'  They're not supposed act this way!  Could someone polease tell these 'Companies' that there is no inflation and their customers want to buy stuff.

    RobotTrader's picture

    The market continues to price in an economic boom or maybe a "crack up" boom of epic proportions.

    Hard to fight the tape with deep cyclicals like CAT and GT making new highs.

    AccreditedEYE's picture

    Robo, bro.... how long have you followed markets? Stocks aren't moving higher because of real end product demand. C'mon, you KNOW this. Balance sheet engineering/ earnings mgmt. and dollar depreciation.... that's all you got son. This rally, like everything else in our financial system, is being synthetically created.

    SheepDog-One's picture

    The only stocks Robo 'owns' are just in his sophomore high school economics class hypothetical paper trade investment account anyway.

    tmosley's picture

    Spalding the Delivery Boy says differently.

    And Spalding has his finger right on the pulse of Chicago.

    monopoly's picture

    And we are on track. Gold, silver at day high. Just sitting here.

    101 years and counting's picture

    consumer sentiment near 70....evan as 71% of the nation believes we are in recession, depression or heading there.

    cabernet's picture

    Seems to me that companies are skittish because they are having trouble growing their real business of providing products and services. A big part of the rebound in profits is dirt cheap financing. Companies are borrowing at a nominal spread over LIBOR. If one is paying LIBOR plus 100-150, their cost of debt is in the 1.25-1.75% range. This is very low compared to a few years ago when they had to borrow at 4-6%. This makes for a nice boost to profits. In addition, managers know that food, energy and clothing are rising rapidly in price, making it harder for people to buy durable goods and leisure items. This makes managers tentative resulting in hiring and now we are seeing layoffs picking up again. We are at the point where the economy must pick up or double dip will be in the cards. With the Fed Gov wasting money on excessive defense and a growing interest bill are not positive factors in the long term. Cutbacks at the government level are not good in the short term. The catalyst for growth is difficult to find.


    Common_Cents22's picture

    Where does a small/med size business get financing for 1.75%   I'll take $1Billion please.

    sun tzu's picture

    They don't. That rate is only for the politically connected corporations like GE, GM and the Wall Street banks.

    Robslob's picture

    Sun Tzu: Don't forgot the wives of all the above mentioned.

    Henry Chinaski's picture

    Price inflation really hit home last night.  A handle (1.75l) of my favorite cheap vodka jumped by $3.  Same across the board for most top-shelf brands. 

    slaughterer's picture

    Try buying some Bordeaux 2009 0r 2010 futures in $USD for a shocker.

    Bam_Man's picture

    Check out the Grand Cru Burgundies if you really want to be floored. They make all but the first growth Bordeaux look cheap.

    SheepDog-One's picture

    At least in Russia, they have enough kindness for the huddled enslaved serfs to provide them with dirt cheap rotgut.

    RobotTrader's picture

    The disconnect is at world record wides...

    With LULU still pinned at highs after a stunning run off the 2009 lows.

    baby_BLYTHE's picture

    Aren't things 10000x worse, currently, than they were at this time in 2008?

    Fuel costs are alreay higher than they were this time in 2008...

    What exactly has changed materially?

    What is next?

    dogismyth's picture

    The answers to your questions is NO.  You are just in insane and can no longer comprehend the goodness of our reality.  Shame on you.  Please report to the Department of Health Services for a more comprehensive indoctrination program.

    baby_BLYTHE's picture

    um... yeah...

    not really an answer. Care to be a bit more specific?

    dogismyth's picture

    R U serious? I was just pulling your tail!

    baby_BLYTHE's picture

    gotcha ;)

    *didn't junk you

    RobotTrader's picture

    Believe it or not, my food costs are down this year:

    Whole Foods still offering $2 off anything at the salad bar or hot food bar on Wednesdays., and $2 off all sandwiches on Fridays.

    McDonalds still offering 2 Big Macs for $3.50, and McDoubles are still only $1.

    After signing up for my Starbucks card, my Cafe Mocha is still the same price as last year, and on top of that, I get a free drink card in the mail every two weeks.

    Subway is still offering $5 sandwiches every other month.

    Gatoraid and Poweraid still on sale regulary at Ralph's Market for $.79/bottle.

    I can still get deals on Monster Energy for $1/can at least once a month from the local Hispanic markets.

    The only inflation I'm feeling is gas prices for my truck.

    FunkyMonkeyBoy's picture

    Sounds like you eat a lot of s**t as well as talk a lot of s**t.

    dogismyth's picture

    Well at least you can still get your poisons at a reasonable price. 

    Bam_Man's picture

    Is your local hospital offering a 2-for-1 special on quadruple bypass surgeries and/or diabetes testing supplies?

    tmosley's picture

    With the shit you eat it's no wonder you are such a moron.

    I'm sure you haven't noticed the that the meat has been shrinking on your burgers (I do because I don't stuff them down my face every day--maybe once a year), and your taste buds have been burned out from all the additives they put on those burgers, so you haven't noticed the decline in the quality of the beans used at Starbucks.  

    You probably don't realize that those $5 sandwiches used to be that price every single day, due to MSG overdose.

    You probably don't realize that sugar water has super high margins, and as such will be among the last consumer goods to decline in price (given that 2 liters of coke costs the same today as it did 15 years ago).

    I'm sure you didn't notice that your energy drinks all fell off the back of a truck.  Probably understandable as you were probably fending off sewer rats the size of badgers while clawing your way through your salvage store, where you are now forced to shop because you have lost all your money piddling around in the stock market.

    I'm sure you haven't noticed that you utilities are costing much much more, as your mother pays for those.  

    It's easy to ignore what you don't want to see, isn't it?

    longorshort's picture

    While robotrader is at it why dont you replace your profile picture with a cool looking robot instead of the stupid %^&&% picture out of your mom's JCPenny Bloomers Catalog.  

    SheepDog-One's picture

    Robos food costs are down because he shops in dumpsters.

    AldousHuxley's picture

    You are getting lesser quality for the same price.

    Also, food cost are small in comparison to other services that define middle class in America: home, education, healthcare. Save a buck on fast food, lose thousands in inflation in other areas.



    blunderdog's picture

    It takes some real chutzpah to call those "food" costs.

    Chuck Walla's picture

    Food costs are down? My Gramma's Lil Friskies bill took another leap. We are looking at Alpo to keep the old girl nourished!

    PY-129-20's picture

    Ask yourself: Is this still the same product? Consider QUALITY, consider QUANTITY.

    So, in case of Germany - yes, the price might still be the same, but many products have changed - so you may pay the same price, but you get 10-30 % less for the same money plus it might not have the same quality. Same goes for every other country facing inflation. And there are other tricks...our whole world is based on this concept.