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February Manufacturing ISM Comes At 56.5, Down From 58.4 In January, And Below Consensus Of 58.0

Tyler Durden's picture


According to the ISM "Economic activity in the manufacturing sector expanded in February for the seventh consecutive month, and the overall economy grew for the 10th consecutive month." Too bad none of this China-driven production is making one iota of impact on the broader unemployment rate. Still, as ISM came in over 50 we are supposed to rejoice as it indicates economic expansion. Notably, the inventory direction as designated by the ISM is one of contraction. What happens if China ever turns off the liquidity spigot is unclear, but we have seen what programs that take from the futures to today do to subsequent demand. Look for a comparable inflection point in the ISM when consistent Chinese GDP "growth "of 12% starts being perceived as just a tad kooky.

ISM respondents commentary:

  • "Depends on division, plant and market served." (Transportation Equipment)
  • "Current economy has killed new capital sales." (Machinery)
  • "Commodities are firming again." (Food, Beverage & Tobacco Products)
  • "First quarter orders up compared to prior two years!" (Fabricated Metal Products)
  • "...lead times for electronic parts are pushing out to 8 to 24 weeks." (Computer & Electronic Products)

The last comment should be the most troubling to tech sector fans.


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Mon, 03/01/2010 - 11:37 | Link to Comment Handle with care
Handle with care's picture

Employment is shrinking, the inventory bounce is over, disposable incomes are declining and all this while the government is pumping in stimulus at a rate equivalent to 10% of GDP per year.


Sincce that can't go on forever, it won't and since all the bad debt hasn't been cleared who can make these bullish medium and long term projections?

Mon, 03/01/2010 - 11:44 | Link to Comment Anonymous
Mon, 03/01/2010 - 11:46 | Link to Comment HarryWanger
HarryWanger's picture

Good news! Fed won't raise interest rates until long after I'm dead. So keep buying equities.

Mon, 03/01/2010 - 11:56 | Link to Comment A Man without Q...
A Man without Qualities's picture

So now that's out of the way, they are going to grind the market higher until the "surprisingly" disappointing jobs data later in the week...

Mon, 03/01/2010 - 12:07 | Link to Comment Gimp
Gimp's picture

They will pump the markets up like an air mattress until it pops!

Mon, 03/01/2010 - 12:10 | Link to Comment Anonymous
Mon, 03/01/2010 - 12:13 | Link to Comment Anonymous
Mon, 03/01/2010 - 12:25 | Link to Comment Dr Hackenbush
Dr Hackenbush's picture

Advise to ignore fundamentals and technicals. 

The 'Key Maker' from Omaha is on CNBC all week; obvious oligarchical serf-pumping of  going on.

Mon, 03/01/2010 - 12:33 | Link to Comment Anonymous
Mon, 03/01/2010 - 12:45 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

S&P 2000 here we come.

Mon, 03/01/2010 - 12:52 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

HOW THE HELL does the ISM - or any other economic data - matter to ANYTHING?

FAKE data.

FAKE economy.

FAKE markets.

Mon, 03/01/2010 - 15:07 | Link to Comment AnonymousMonetarist
AnonymousMonetarist's picture

Via Bill 'Red Pill' King

 Few people realize that the index is seasonally adjusted and the ISM will not divulge the adjustment.

People that called ISM to get the adjustment were told to ‘figure it out for yourself’. 

(The cafones and poveretts, for whom the books are always closed have been told 'col tempo la foglia digelso diventa seta'. -AM)

Mon, 03/01/2010 - 13:03 | Link to Comment Anonymous
Mon, 03/01/2010 - 13:48 | Link to Comment jmc8888
jmc8888's picture

Low inventory equals longer wait times.  I bet the JIT guys are pulling their heads out trying to actually figure out how much they have to stock to be JIT. Of course it's not anything to do with TSMC chip yields (which have now been solved), or the supposed win 7 upgrade cycle where the Ram manufacturers elevated prices by 50 percent.

Lower inventory = longer wait/lead times

Process problems = longer wait/lead times

I say that is one poor metric which forgets many important factors when considering that electronic parts are going 8-24 weeks out.  That's not because things are running at full steam, and they can't get enough.  It's because of deliberately low inventory and PRODUCTION levels.  Before the crash when you decided to purchase your good it was already made.  Today, odds are it's either being shipped or still being made, you'll have to wait. 


In other words 8-24 weeks isn't because of an improving economy, it's becase of the business decisions within the industry.  You won't find many tech companies building an inventory, then finding out what to do with it.  No way do they want to be sitting on a pile of inventory. 


That's not a sign the economy has recovered.  That's a sign that tech is thinking this is a long term economic slow down.  (so it's a negative sign, not a positive one)


Mon, 03/01/2010 - 13:56 | Link to Comment merehuman
merehuman's picture

burned out on bad news.

Fri, 04/16/2010 - 10:33 | Link to Comment Tom123456
Tom123456's picture

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