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Chicago PMI Surges To 68.6 On Expectations Of 62.5, Highest Since July 1988
Even as economists were expecting a contraction in December from the November print of 62.5 to 61.0, the Chicago PMI climbed to 68.6 in December, an unprecedented 15th consecutive month surge and the highest reading since July 1988! In terms of specific indices: Production reached its highest levels since October 2004; New Orders improved to 2005 levels; Employment reached its highest level in more than 5 years; Priced Paid accelerated to its highest point since July 2008. And while inventories and "prices paid" demonstrate that the prevailing weakness across inventory accumulation and margin pressures as seen in other diffusion indices persist, there was strength in most verticals. Then again, as the PMI is a B-tier indicator at best, it is unlikely that the Fed will actually look at it in determining whether or not to end its monetary stimulus. But be sure it will be trucked out to validate any stock ramp in the next several hours.
From the general comments in the survey, which is actually like something one would read in year three of any Chinese 5 year plan:
- 2010 was a very, very good year, 2011 looks just as strong thru Q1!
- The level of business keeps increasing and the resources to handle are not available.
- Our backlog is increasing. Supplier lead times are still too long.
- Employee turnover is starting to increase, this along with continued downsizing and
increased outsourcing is driving consultant hiring. - Lending market slowly thawing but only for strong (financially) borrowers. Weak
borrowers are still finding it nearly impossible to find a competitive source of reliable
funding. - Some localized shortages of stainless and HRS plate continue to cause some production
problems. business continues to improve for us though not as strong as it has been. - Food Commodity markets are strongest in years. Global supply/demand now has greater impact than domestic S&D's.
On the chart above please note the highest ever PMI print in 1974... followed propmtly by what can pass for the lowest ever, in the year following. This is what happens when future activity is forcefully brought forward courtesy of central planning.
Full report here.
Here is Goldman's instabull report:
Midwest Factory Survey Surges to Two-Decade High
BOTTOM LINE: Chicago purchasing managers' index jumps to a 22-year high as indexes of orders, production, and employment all post gains from already-strong levels.
US-MAP
Chicago purchasing managers' index +12 (4, +3)
KEY NUMBERS:
Chicago purchasing managers' index 68.6 in Dec vs. GS and consensus 61.0.
MAIN POINTS:
1. Midwest manufacturing activity surged in December, with the Chicago purchasing managers' index posting its highest reading since 1988. The new orders index rose to 73.6, "only" a six-year high, while the production index climbed to 74.0 and employment to 60.2. Order backlogs jumped from 48.9 in November--suggesting a slight decline in backlogs--to 64.6 in December. All these readings suggest widespread growth in factory activity in the region.
2. Less positive signs were a sharp rise in the inventories index, to 60.1, and a further increase in "prices paid" to 78.2. Given the strength in orders, however, we are not especially concerned about the inventories reading [naturally]. Meanwhile, the prices paid index largely reflects commodity price increases that are already known to markets. [but, but, isn't the market "aware" of prevailing deflation everywhere??? or is the Core CPI used when handy, and ignored when the truth is needed...]
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Of course, no one really wants to talk about poverty in America...except a few cartoon characters:
http://www.youtube.com/watch?v=qi0X3wwuS-8
Dow should be at 13,000 on this news -- WTF?
This should help Illinois and Chicago pay their debts....LOL
you're kidding right?
You know, if every single god damn measure doesn't meet expectations...then aren't the expectations worthless?
Seriously, what's the point if 'expectations' are literally guesses?
Isn't Illinois bankrupt? How can this be when everything is so much better than 22 years ago?
That was my question.
Everything coastal or overbuilt is bankrupt. You can call illinois coastal becasue of great lakes. They get out of relativity with central economies and have to deflate.
This morning's existentialist moment: US anemic economic growth shows huge stock market gains for 2010. Brazil, which feeds the US and China and is in the midst of an economic miracle, shows near flat market.
How do I arb that one?
Just BTFD !
ZH, where bad news is bad news and good news is somehow still bad news. No more credability than the MSM!
this site has unfortunately become a parody
You are obviously clueless.
Any growth in the USA for the past 10 years is due to deficit spending.
The problem is...without deficit spending, the country will go into recession for an extended period of time.
It's a Catch 22, but I guess you just don't get it.
ZH, where bad news is bad news and good news is somehow still bad news. No more credability than the MSM!
Credibility is what you make of it. Information is information. While ZH may provide a perspective on information that’s usually only found in the comments sections of MW or other MSM outlets, the value judgment of “good” or “bad” as it relates to investing is nearly irrelevant as there are at least 2 sides to every trade.
Sure, I’ll be happy to attend the parade when “Happy Days are Here Again” but there will be losers too when that day finally arrives. Until then, I’ll still be happy to read the information and perspectives presented.
“There is no use trying; one can't believe impossible things." (Alice)
"I dare say you haven't had much practice. When I was your age, I always did it for half an hour a day. Why, sometimes I've believed as many as six impossible things before breakfast.” -Queen
Nothing is impossible when you aren't really trying. Wait...I mean nothing is possible when you're really trying. Wait..... Boy now I'm really confused. Which is exactly the state of mind the magicians are trying to promote as they spread magic pixie dust through out the land.
Economy doing poorly? The Fed needs to continue to pump pump pump. Economy doing much better, the Fed needs to continue to pump pump pump. The economy may begin to falter in Q2 of 2011, the Fed needs to continue to pump pump pump. The only constant here is the Fed continuing to pump pump pump.
Mission Accomplished dear Alice. Now, let's see how deep this rabbit hole really goes.
US Steel, Olympic Steel .... ZEUS has been on fire ....
I think we have a pullback looming but after that back on the steel stocks and financials.
Don't you mean Hephaestus?
I have been talking about chicago manufacturing being on fire for 10 weeks. Thus my call on this board to buy US Steel at $44 and Olympic Steel at $24.
US Steel up 35% in a little over 8 weeks. Olympic Steel is still a great buy its centered in the midwest with CAT,Joy Global,Bucyrus ...
Yeah, the P/E of ZEUS is a sight to behold. They're one big contract away from survival, or doom.
Baidu has a brutal P/E. That trade has worked out well for some.
Look at a 1 year chart for ZEUS, I see breakout over the last 6 weeks, goes along with manufacturing. Now look at a 5 year chart ... Buy low.
Steel...for building what?
Cat has never been this busy. Roofing,Printing,Oil&Gas,Mining,Nuclear,Rebuilds .... The dollar dropping has also helped, a lot of equipment is getting shipped overseas.
Yeah, great... the added taxes resulting from this increase in business should be enough to cover... what... 0.5% of the deficit?
And then comes the bailout of the munis.
Infrastructure. Communications towers, bridges, etc.
"Priced Paid accelerated to its highest point since July 2008."
Ludwig von Mises said that an expansion of credit (which exactly what a flood of air-backed money is) creates the "appearance of prosperity", after which rational economics returns. This is the "double dip" everyone is worried about.
"True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression."
You could also say that inflation looks a lot like growth at the beginning......
December 31, 2010
CHINA is preparing for conflict ''in every direction'', its Defence Minister says.
''In the coming five years, our military will push forward preparations for military conflict in every strategic direction,'' General Liang Guanglie said in an interview published by state-backed newspapers in China.
''We may be living in peaceful times, but we can never forget war, never send the horses south or put the bayonets and guns away.''
If they tout recovery, $5k gold will not be an issue. 'What, gold is $5k, so what? That does not affect my life, what do I use gold for. If you want some, get a job! The recession is over! Now give me my ipad back.'
Of course, if the dollar continues its down move, oil will cost more. Not even considering supply constraints, which if you are in the know, are bound to happen. Once again, the above works except replace gold with oil.
'Oil may be five dollars per, and sure food prices have doubled, but my trust fund went up thanks to Bernanke devaluing the dollar, and so my five thousand dollar check is still coming every month. Time for some X box.'
Shit don't change till it does. It is about to. Is there really a difference between 5 days and five months? Go ask Ashton.
The chart of the PMI tells all. The highest ever recorded number was in 1974, which was followed by the lowest number about a year later. The 70's was the last time the federal government tried to central manage the economy. We all know how that turned out.
small / midcaps went on a tear through the early 80s? folks who were long hard assets made a killing? buy friggin puts on the the damn PMI index then. Or just get that shotgun and sit behind the door!
Must be the mid-west Hogs trading up .50................What a crock of shit............isn't Rhom out there now??....you believe anything that comes out of Chitown??
THE massive Queensland coal industry is at a standstill as flooding shuts mines, rail lines and ports.
The flooding is causing at least $2 billion in lost production for the industry - source of more than half the world's seaborne trade in the commodity
As Queensland Premier Anna Bligh predicted the damage bill from the state's worst floods in at least half a century would run into several billion dollars, miners including Rio Tinto, BHP Billiton, Xstrata and Anglo American were forced to shut down production at dozens of mines.
Anglo American is the affected miner.
Remember this is a diffusion index....which means it now has no where to go but down. Think about what a diffusion index is and how it is calculated to understand how (or not) informative this number is or isn't. Also remember a diffusion index tell you absolutely nothing as to the magnitude of any increase/decrease in activity.
Since 1988 Invetories have only been higher three other times 1994, 2005, 2006. Employment Index one time 2005, Production Index one time 2005 and New Orders Index twice 2004, 2005.
Bernanke and Sack arent gunning the hell out of indexes on this news dump? They should have dropped this phony data on Jan 2, today looks dead.
What about the non seasonal adjusted numbers. Production down on November, New orders down on November, Order backlog up, inventories up quite abit, Employment outlook down on November, prices paid up significantly, and overall 61.8. The question should be whether the seasonal adjustment is valid. There should be cristmas ordering which tails off, providing retailers are not relying on January sales. There should be a pick up of new lines ordering for the post january sales. My hunch is that the purchasing managers are becoming more savvy and the need for seasonal adjustment is not as great especially since bad weather may have played a part. As for the comments then I think the ISM has been a bit selective picking the best and worst rather than the average comments.
Go go America, im rooting for ya!
This report is also full of HUGE seasonal adjustments. e.g., the SA increase in order backlogs was almost double the NSA increase. Tout TV also failed to mention that inventories and prices paid (inflation) increased, and production declined on a NSA basis. Even the overall index only increased marginally on a NSA basis.
If this does not represent a top of some sort, I do not know what does.
Not too familiar with this but is it possible that there is a build up ahead of price increases coming in 2011 because of the rise in commodities i.e. cotton etc...
Could be, but I would doubt that's what's driving the activity. You're probably seeing a whip-saw of the start-stop in 2008-2009. Different businesses operate with different business cycles that will normally offset each other as the year progresses. The economy was effectively re-set, clocks were started from the same point, and a lot of business are now synchronized. This will likely make forecasting for guys like me a complete and utter bitch as companies go from a standing start to hair-on-fire in nothing flat.
Cats and dogs living together. The end is neigh!
Holy Crap the DOW is down 30 points....the PPT must be in the men's room...they will be on this in a few minutes I'm sure...we have to close up , the market is not allowed down ticks dammit!
Okay, PMI should be a fairly generalized thing, but I really sense people don't pay attention to which sectors are going up and down and how some sectors have increase in importance and how some have faded. People pay attention to manufacturing, and if you work in the industry, it matters. But there are more unemployed people than people employed as manufacturing workers, so to economy as a whole UI extension pretty important, and manufacturing a lot less important to economy than 30 years ago.
I work in construction, it is depressed and not improving only thing helping a bit was small infrastructure from govt spending and that will not be increasing now.
Corporations selling overseas and in financial sector doing well, but US workers not reaping any of that success.
So US stock market and many other indicators have de-coupled from the economic health of the US worker.
Funny....
Nobody looks at the charts. When the Chicago PMI surges to these levels, it is followed by a long drawn out down trend...
Enjoy your euphoria!