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Chicago PMI Plummets From 67.6 To 56.6, Biggest Monthly Drop Since Lehman Bankruptcy

Tyler Durden's picture


The May Chicago PMI is out and contrary to the herd of clueless Wall Street idiots, better known in polite circles as economists, it came at 56.6 on expectations of 62.0, a collapse drop from the 67.6 before. This is the worst monthly drop since the economy imploded back in October 2008, and the second largest two month drop since 1980! A quick look at the New Orders index indicates it was the lowest since September 2009. But the good news: the economy is still in expansion... for about 1 more month.  The release says it all: "NEW ORDERS and PRODUCTION posted their largest declines in several years...but remained positive" and "INVENTORIES accelerated buildup" - thank god for artificial economic expansion. And from the respondents: "Fuel cost are going to have a major impact on business activity in a negative way that will slow recovery to a crawl." Uh, what recovery? Just you wait until QE3 is announced in 3 months. And elsewhere, the May consumer confidence completed the trifecta of bad news, coming at 60.8 on expectations of 65.4, and down from 66.6.

And the two month change:

And from Reuters, a comparison of PMI and GDP:

The survey respondents confirm everything we have been saying since the Japanese earthquake struck in March, and really since December 2010, when we had the nerve to mock Goldman's December 1 call for an economic resurgence.

1  ?Incoming orders have definitely slowed down, but we needed that. We do continue with a high level of quote activity.
2. ?Prices continue to increase eating into margins which will inevitably impact the long term organic growth outlook for the US. Oil markets continue to rise, primarily on speculation, which could have short-term impacts on economic and job recovery. Increases on food costs could foster continued economic and political instability in third world countries. Strengthening of foreign currencies against the dollar are cause for concerns relative to continued inflationary pressures.
3. ?High oil prices are driving up pricing on plastics, and most chemical items. High commodity prices such as corn (>7% increase in April) continue to escalate industrial ethanol pricing. High Fuel prices are also driving up costs. At some point demand will drop because there will be less in the spending pool for consumers, which will cause business to decline. Weakness of the dollar vs foreign currency is also causing issues with increased costs for imported goods. Rough times ahead if oil & commodities do not ease up.
4. ?Aluminum pricing, like other commodities I suspect, has really eaten into our margin. Mills and Fabricators alike are increasing their cost, besides the actual commodity. Paper Roll and Film suppliers are adding a temporary surcharge to their goods to cover costs they are incurring. Seems to be getting popular among the bigger players.
5. ?Our prices are up (asphalt/oil), and the weather is hurting the construction industry right now.

6. ?Fuel cost are going to have a major impact on business activity in a negative way that will slow recovery to a crawl.
7. ?Commodity prices need a break. Hopefully the new planting season has good weather and produces good harvest yields.
8. ?Business keeps increasing but pricing pressures continue to rise as well. Often we see no valid reason for some of the increases other than trying to improve margins.
9. ?Inventory increase to cover any fall out from Japan crisis. Commodities are still pushing up our cost.

10. ?Slowdown from Japan automakers.
11. ?Finally seeing a slow down in the request for price increases.
12. ?Local economic environment beginning to show signs of gaining steam BUT financial quality of certain borrowers remains poor.


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Tue, 05/31/2011 - 09:44 | 1325030 LRC Fan
LRC Fan's picture

I love how economists can miss these numbers over and over and over and no one seems to care.  Who's worse, economists or ratings agencies?  Oh wait, they are both on the same payroll.  Got it. 

Tue, 05/31/2011 - 09:46 | 1325039 oogs66
oogs66's picture

Out of 55 estimates on bloomberg, no one got it right, and only 2 people underestimated the number.  Weirdly, one of them was LaVorgna from DB.

Tue, 05/31/2011 - 10:28 | 1325192 nope-1004
nope-1004's picture

No one said propaganda is necessarily correct.

The Ministry of Disinformation in this country is working overtime.  I believe nothing, only that I'm paying more for essentials, working harder, and have less disposable income at the end of the month.


Tue, 05/31/2011 - 11:00 | 1325345 Harlequin001
Harlequin001's picture

I'm just revelling in the ferver of a fine economic recovery...

Tue, 05/31/2011 - 11:47 | 1325525 Don Birnam
Don Birnam's picture

Mr. Market's response ?

DJIA +71

Nazz +16

S&P  +7

"What, me worry ?"

Tue, 05/31/2011 - 09:51 | 1325056 Re-Discovery
Re-Discovery's picture

and over and over and over and over and over . . . etc., etc., etc,. . . . .

Tue, 05/31/2011 - 09:59 | 1325077 Id fight Gandhi
Id fight Gandhi's picture

You figure if anyone else messed up their job this much theyd be fired.

Oh well, market don't care, just keeps rallying, cant let a sour economy run a happy day over Greeks getting more bailout money.

Bizarro world indeed.

Tue, 05/31/2011 - 10:06 | 1325121 Worker Bee
Worker Bee's picture

Im a paramedic and if I was this wrong people would die..and I probably make a quarter of what these douche bags do....go figure.

Tue, 05/31/2011 - 10:13 | 1325139 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

Well, there's your problem:  A dead body is an objective fact. 

But who's to say that an economist is wrong generally about "the economy" "improving" or "bottoming". 

If you changed careers and instead advised people on how to "live better", they would find it substantially harder to prove you aren't doing a good job!

Tue, 05/31/2011 - 10:27 | 1325206 Worker Bee
Worker Bee's picture

Hmmm..Dead bodies means less people looking for jobs..less people defaulting on mortgages and less medicare!! Im not a medic Im a Green shoot gardner!!

Tue, 05/31/2011 - 11:02 | 1325354 Harlequin001
Harlequin001's picture

but it's my guess that if you were dead you would probably default...

just sayin'...

Tue, 05/31/2011 - 11:21 | 1325424 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

TYLER--could you re-do the graph you posted last week with the ISM showing the doble dip, and add today's information?


Would be interested to see.





Tue, 05/31/2011 - 09:45 | 1325032 oogs66
oogs66's picture

Nov 2009 was last time we printed below 56 on this.

Tue, 05/31/2011 - 09:45 | 1325033 Herne the Hunter
Herne the Hunter's picture


Tue, 05/31/2011 - 09:49 | 1325036 Franken_Stein
Franken_Stein's picture


Oh shit.

We are in a world of trouble and pain now.

Time to jump out the window.


Tue, 05/31/2011 - 09:51 | 1325045 SheepDog-One
SheepDog-One's picture

Franken, it just makes me laugh people think that a bit more money printing sleight of hand can carry us forward glitch free another 16 months to some mythical 'election' goal? Total nonsense to me, like saying if only another gallon of fuel is added to the 747 tank we can glide from San Fran to India.

Tue, 05/31/2011 - 10:10 | 1325119 augie
augie's picture

well, if you are a joo the Hanukkah oil lasted for 7 nights when it was only suppose to last for one. Christians and muslims have their own stories inspiring hope when all looks grim. People have been believing lies for thousands of years, thats not a slight towards god, thats a full-wind-up backhand to religion.

Economics has become a religion. Its no longer accountable to fact or reality. It's just what allows people to have enough piece of mind/purpose to punch a clock and remain comfortably subservient so as to avoid the terror inspiring concept that we are all intrinsically good and not what our culture tells us we are.


Tue, 05/31/2011 - 10:09 | 1325122 Franken_Stein
Franken_Stein's picture




Have you heard of the new P2P digital money called Bitcoins ?


The money is "calculated" with a distributed algorithm on private computers in a decentralized "crowd computing" fashion, with the more participating computers, the more secure and acceptable the money becomes.

Every contributor of CPU clocks / instructions to calculate so-called "blocks" which make up the newly created Bitcoins is rewarded with previously generated Bitcoins.


Every Bitcoin is an encrypted and digitally signed piece of data bytes that store its history

, date of creation, number and ID of network computers it was previously stored on and so on.


No central authority, no bank, no fees involved.

The only way to stop it is to switch off the Internet.


Bitcoins works in a way like Napster or EDonkey and was invented in 2009 by the Japanese hacker Nakamoto.


Tue, 05/31/2011 - 10:12 | 1325143 ebworthen
ebworthen's picture

This is like our money in our digital bank accounts except there's probably more honor among hackers than their is in central bankers.

Tue, 05/31/2011 - 11:38 | 1325499 MachoMan
MachoMan's picture

Except when the most industrious hackers are actually de facto government workers...

Tue, 05/31/2011 - 09:49 | 1325037 SheepDog-One
SheepDog-One's picture

Collapse confirmation has to be highly bullish, or something. Think I'll polish my silver and gold today.

Tue, 05/31/2011 - 09:48 | 1325046 RobotTrader
RobotTrader's picture

Wow, biggest money printing bonanza in a generation and the SPY is less than 1% from 3-yr. highs and many gold stocks are red today.  And to boot the 5-yr. yield is still under 1.75% as many investors still fear a new recession and could care less about stocks.

Tue, 05/31/2011 - 09:52 | 1325063 SheepDog-One
SheepDog-One's picture

Any investor with 2 brain cells to rub together is bailing from this trainwreck. Better bail now, at any moment bids will not be hit soon as the 401K Bathrobe Brigades get nervous and place their large sell orders. The trick is to smell the smoke and get out before youre engulfed in flames.

Tue, 05/31/2011 - 09:53 | 1325066 firstdivision
firstdivision's picture

This is smelling like a massive retail setup more and more.  It is really odd to watch yields fall and stocks go up. 

Tue, 05/31/2011 - 09:57 | 1325085 Miss Expectations
Miss Expectations's picture

Why don't you change your name to Idiot Consensus?

Tue, 05/31/2011 - 10:03 | 1325095 Robslob
Robslob's picture

Robo...I highly recommend you go read might help you understand.

Tue, 05/31/2011 - 11:54 | 1325567 DoChenRollingBearing
DoChenRollingBearing's picture

+ $1530  


Send me a gmail R and I will direct you to my blog, I write about gold, TEOTWAWKI and "The Tinfoil Brigade".  Other topics too.  Great fun.

Tue, 05/31/2011 - 10:03 | 1325104 jus_lite_reading
jus_lite_reading's picture

I am yearning for Goldmans take on this..... spin this muthafuckers

Tue, 05/31/2011 - 10:17 | 1325157 Tortfeasor
Tortfeasor's picture

And gold within 2% of its alltime high

Tue, 05/31/2011 - 10:30 | 1325222 fuu
fuu's picture

Nominal highs. Still have a long way to go to get back to 2000.

Tue, 05/31/2011 - 11:59 | 1325577 DoChenRollingBearing
DoChenRollingBearing's picture

+/- 40% inflation since 2000.

Watch where you aim that thing!!!

Tue, 05/31/2011 - 13:09 | 1325754 fuu
fuu's picture

I only aim at the bullshit, so you are pretty safe.

Tue, 05/31/2011 - 09:52 | 1325051 youngman
youngman's picture

BUT...BUT...BUT...GREECE DAMIT..Greece is what we are celebrating....come one..we need one happy day for Greece....

Tue, 05/31/2011 - 09:54 | 1325055 GOSPLAN HERO
GOSPLAN HERO's picture

Osama Obama is sweating the 2012 election.

Tue, 05/31/2011 - 09:53 | 1325067 SheepDog-One
SheepDog-One's picture

16 gliding a 747 on a gallon of gas halfway around the world. Cant be done.

Tue, 05/31/2011 - 10:14 | 1325152 Northeaster
Northeaster's picture

Have you looked at the field of challengers? Obama walks right back into office as if there's nothing wrong.

Tue, 05/31/2011 - 10:32 | 1325230 Raynja
Raynja's picture

They're setting Huntsman up for a 2012 win.

Tue, 05/31/2011 - 13:40 | 1325852 earnyermoney
earnyermoney's picture

Why setup Huntsman when Obama has provided an excellent ROI? Obama is a lock in 2012.

Tue, 05/31/2011 - 09:54 | 1325057 Cdad
Cdad's picture

Just look at that Roach Motel [SPY].  Wholesale liquidation of positions...MASSIVE...and yet the instrument barely moves.  If ever there was proof that the market is broken, the Roach Motel is the tell.

In the meantime, superdee duper bullish criminal syndicate Wall Street algorithmic bulls have been selling into the fabricated up open. Six second long equity hold period complete.

Confidence inspiring!  Thanks again, Ben.


Tue, 05/31/2011 - 09:55 | 1325062 alien-IQ
alien-IQ's picture

that confirms it: Rally is on. (with news like could it not be?)

Tue, 05/31/2011 - 09:54 | 1325070 Racer
Racer's picture

Once upon a time, this sort of news mattered to investors, now it is only machines that can't read, it doesn't

Tue, 05/31/2011 - 09:58 | 1325073 RobotTrader
RobotTrader's picture

Huge breakaway gap in FXI after Shanghai has been sold down hard the last two weeks is a big heads up for the bears.

Traders are now becoming even more emboldened to start buying each and every dip from here on out.

Tue, 05/31/2011 - 10:16 | 1325148 Internet Tough Guy
Internet Tough Guy's picture

Momo, you are still the perfect fade. No comment on the 'huge upcoming economic expansion'? LOL

Tue, 05/31/2011 - 11:50 | 1325548 DoChenRollingBearing
DoChenRollingBearing's picture

ITG, you might like my blog.  Send me a gmail if interested, I write about gold, FOFOA, TEOTWAWKI and the Tinfoil Hat Brigade!

Tue, 05/31/2011 - 09:59 | 1325079 Bleeping Fed
Bleeping Fed's picture

Yet another indicator that US data no longer matters--only Europe and China.

Tue, 05/31/2011 - 10:01 | 1325084 RobotTrader
RobotTrader's picture

Still strong bids in TLT today after the flurry of horrid economic news.  Interest rates keep getting driven lower and lower providing even more cheap fuel for the stock speculators who can now buy anything and everything with super low margin rates.

Tue, 05/31/2011 - 10:15 | 1325158 Internet Tough Guy
Internet Tough Guy's picture

Strong bid in oil. Your bus pass won't be getting any cheaper. You must be puking up blood.

Tue, 05/31/2011 - 11:28 | 1325463 hardcleareye
hardcleareye's picture

I don't know how many times I have read your posts and junked you but I have to grudging admit quite a few of your calls have been correct.

Yesterday you predicted that Greek issue would somehow be "resolved" before trading opened, and low and behold you were right...

It seems Robo Mom didn't raise such a fool afterall....  I will miss junking your posts, it was such fun......

Tue, 05/31/2011 - 10:02 | 1325088 Caviar Emptor
Caviar Emptor's picture

ISM Chicago: -Employment index: Down -New Orders: Down (big) -Prices paid: slight down

Can you spell recovery? 

If you can't, than just remember these two little letters: Q+E

Tue, 05/31/2011 - 10:03 | 1325089 Caviar Emptor
Caviar Emptor's picture


Tue, 05/31/2011 - 09:59 | 1325090 holdbuysell
holdbuysell's picture

Consumer confidence now tanked too.

A trifecta of bad data for the day.

And the S&P continues to soar.

Go figure.

Tue, 05/31/2011 - 10:00 | 1325096 LRC Fan
LRC Fan's picture

The US economy is fine

-Hamy Wagner

Tue, 05/31/2011 - 10:03 | 1325102 Mike2756
Mike2756's picture

All we need is $200 a barrel oil to prove it!

Tue, 05/31/2011 - 09:59 | 1325091 Skyprince
Skyprince's picture

Just more reason for QE3...and the beat goes on...BUY THE DIPS!


Tue, 05/31/2011 - 10:09 | 1325117 Id fight Gandhi
Id fight Gandhi's picture

But I don't want qe3!

Sure it will make the stock market rise and commodity rise, but they won't hire more people, it hasn't helped housing.

Just let th damn free market flush the shit out already.

Tue, 05/31/2011 - 10:32 | 1325229 Cruel Aid
Cruel Aid's picture

Ron Paul was making sense this AM and spoke of price control talk in Europe, no chance of reform due to the Ryan gutting after trying anything, complete loss of free market economics and ultimate doom within 2 years although timing doom was difficult.

He also said QE whatever it takes untill we inflate out of FED debt... win or lose/damn the commodities.

Tue, 05/31/2011 - 10:06 | 1325103 Dolemite
Dolemite's picture

Smart money shorting this rally?

Tue, 05/31/2011 - 10:07 | 1325110 Robslob
Robslob's picture

QE3 celebration will last about as long as a crack addicts last hit...then, back to recession / regression.

The pump in futures is now mask the "real world" data so that after the fall everyone will now have the barometers of "bad data" to point to when stating the obvious...invest at your own risk.

Tue, 05/31/2011 - 10:07 | 1325127 Caviar Emptor
Caviar Emptor's picture

Yes, we've proven now that the economy simply goes straight into contraction mode without stimulus. We must have Fed money to maintain growth. 

Tue, 05/31/2011 - 10:07 | 1325112 sbenard
sbenard's picture

Wow! It dropped nearly TWICE the consensus. But I suspect it still won't matter. Wall Street is so drunk on bailouts, stimulus, and Fed printed prosperity that news is now irrelevant!

Tue, 05/31/2011 - 10:08 | 1325115 Caviar Emptor
Caviar Emptor's picture

Let's see ISM Chicago? Well, that's just Chicago. Chicago Fed Midwest? Well that's just the middle of the country. Case Schiller and Consumer Confidence? Well...well...guess that affects everyone. Everyone that is, except your friends the banksters

Tue, 05/31/2011 - 10:06 | 1325123 sbenard
sbenard's picture

This isn't just bad. It's TERRIBLE!

Tue, 05/31/2011 - 10:10 | 1325126 oogs66
oogs66's picture

they couldn't even manipulate the consumer confidence number to a decent level

Tue, 05/31/2011 - 10:11 | 1325128 Cdad
Cdad's picture

The XRT is just now wondering why it is up.  Again, it takes a massive 540k share dump and just sits there, as if it were wearing a hockey helmet when it took the blow.  Traders follow up with a 600k plus bid...and it sits there.

The VIX reverses a 5% loss in 14 minutes.  That's....normal.

Ponzi market end of the month mechanics.

Tue, 05/31/2011 - 10:08 | 1325129 sbenard
sbenard's picture


Tue, 05/31/2011 - 10:08 | 1325132 Racer
Racer's picture

And of course it time to BTFD with the news

Tue, 05/31/2011 - 10:09 | 1325133 lizzy36
lizzy36's picture

What level does S&P have to fall to for Bernanke to institute QE3? 900 or 1000?

QE3 doesn't happen until 2012. Election year. Need full impact for Obama reelection.

Tue, 05/31/2011 - 10:12 | 1325135 youngman
youngman's picture

It will not was so baked in....its a live comedy we are living in...bailouts good...lower priced homes good..less jobs good....more foodstamps..good...debt to the moon and beyond..good..I need to drink more..this is just unreal...

Tue, 05/31/2011 - 10:09 | 1325136 jtmo3
jtmo3's picture

There is little economic activity going on because, as you know, the .gov is a major portion of any activity still going at this point, and they are busy spending it all on keeping the stock market and foriegn countries alive.


QE3 will commence in some form and the whores in the media will proclaim no one cound see $6.00 gas and out of this world food prices coming. It's all because of those middle east and europe bastards that we pay this much for everything. If only they could get their shit together.


My biggest fear is...most morons in this country actually believe that.

Tue, 05/31/2011 - 10:11 | 1325142 Translational Lift
Translational Lift's picture

Cool.....Buy the gap UP!!!

Tue, 05/31/2011 - 10:13 | 1325147 Racer
Racer's picture

Nothing fixed after all that money thrown at the banksters

Tue, 05/31/2011 - 10:16 | 1325149 Bleeping Fed
Bleeping Fed's picture

"Incoming orders have definitely slowed down, but we needed that. We do continue with a high level of quote activity."

I work in manufacturing--this was business as usual during the worst of 2008 & 09.  Our customers had us quoting like mad while orders slowed to a trickle.


Tue, 05/31/2011 - 10:20 | 1325173 ebworthen
ebworthen's picture

Bad news and markets up.

QE3 will sail late summer early fall as the kids head back to school and to get ready for the Holiday happy time.

QE4 will leave the naval yards at Newport News along with a new sub to vie with the Chinese Song, Yuan, and modified Kilo subs just in time for the election a year later.

Tue, 05/31/2011 - 10:19 | 1325174 SheepDog-One
SheepDog-One's picture

The next big collapse will come on a big uptick.

Tue, 05/31/2011 - 10:29 | 1325199 Dolemite
Dolemite's picture

Was this the uptick today?

Top in place?

Tue, 05/31/2011 - 10:43 | 1325264 anyways
anyways's picture

QE3, i'm lovin it!

just buy the fucking dip! LOL

Tue, 05/31/2011 - 10:50 | 1325297 PulauHantu29
PulauHantu29's picture

Who needs PMI? Just give me more Bread and Circus and I'll be happy.

Tue, 05/31/2011 - 11:52 | 1325550 DoChenRollingBearing
DoChenRollingBearing's picture


I can't believe I was the first to say that on this thread.

Tue, 05/31/2011 - 13:34 | 1325794 Dr. Acula
Dr. Acula's picture

This is bullish for stocks. Remember, Zimbabwe had the best performing stock market in the world for a while.

It's ABC investing now: hold stock certificates, gold, silver, dentrifice... Anything but cash.

Tue, 05/31/2011 - 16:30 | 1326436 P-K4
P-K4's picture

Don't abandon the SUV yet, the Motorcity, courtesy of gubermint motors is ramping up hiring and production. The Marketing intellignetsia has figured out it time to take advantage of Japan's slowdown and all those empty lots in cities across America. I wouldn't doubt it if Build America Bonds proceeds are being used to purchase these fine automobiles.

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