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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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. 

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.

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.


Harlequin001's picture

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

Re-Discovery's picture

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

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.

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.

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!

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!!

Harlequin001's picture

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

just sayin'...

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.





oogs66's picture

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

Franken_Stein's picture


Oh shit.

We are in a world of trouble and pain now.

Time to jump out the window.


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.

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.


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.


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.

MachoMan's picture

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

SheepDog-One's picture

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

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.

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.

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. 

Miss Expectations's picture

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

Robslob's picture

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

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.

jus_lite_reading's picture

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

Tortfeasor's picture

And gold within 2% of its alltime high

fuu's picture

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

DoChenRollingBearing's picture

+/- 40% inflation since 2000.

Watch where you aim that thing!!!

fuu's picture

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

youngman's picture

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

GOSPLAN HERO's picture

Osama Obama is sweating the 2012 election.

SheepDog-One's picture

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

Northeaster's picture

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

Raynja's picture

They're setting Huntsman up for a 2012 win.

earnyermoney's picture

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

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.


alien-IQ's picture

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

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

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.

Internet Tough Guy's picture

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

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!

Bleeping Fed's picture

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

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.

Internet Tough Guy's picture

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

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......

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