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
- 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.
Chicago purchasing managers' index +12 (4, +3)
Chicago purchasing managers' index 68.6 in Dec vs. GS and consensus 61.0.
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...]