Goldman Blames Weather For Weak Construction Report But Not For "Super Strong" ISM Number
The Kool Aid gushing from Goldman economic desk has become torrential. While the "super strong" ISM number was perfectly organic (in advance of Hatzius starting to demand QE3 in about 3 months, when everything will be spun as having been really stimulus-driven), the firm noted that the plunge in construction outlays were due to the weather. Luckily, Goldman did mention that surge in price paid with the following brilliant conclusion: "the prices paid index rose by 9 points to 81.5-most likely due to higher prices for energy and other commodities." Well, that's why they pay the German economist the big bux.
USA: ISM Survey - Super Strong Manufacturing; Construction Weak, with Weather Probably a Factor
BOTTOM LINE: The ISM manufacturing survey rose ahead of expectations in January, as new orders surge to a new cycle high. In general, the composition of this report was even firmer than the headline result. Construction spending down sharply in December, led by a sharp drop in residential projects and probably due at least in part to weather.
1. The Institute for Supply Management (ISM) surprised on the upside, rising 2.3 points to 60.8 in January. This increase was mainly driven by a surge in new orders which rose by 5.8 points to a new cycle high of 67.8. The remaining indexes that make of the headline were also up: production rose (by 0.5 point to 63.5), employment strengthened (by 2.8 points to 61.7) and supplier deliveries rose (by 1.9 points to 58.6). As the inventories index rose only slightly, the difference between orders and inventories rose by 5.2 points to +15.4. Regarding the components that do not enter the headline, backlogs surged 11 points to 58.0, customer inventories increased 5.5 points to 45.5, and the prices paid index rose by 9 points to 81.5-most likely due to higher prices for energy and other commodities.
2. Construction outlays fell sharply in December, led by a 4.4% drop in spending on residential projects. Outlays for other projects were down 1.6%, with most of the decline showing up in the public sector (-2.6%). Data for prior months were revised down on balance, but only slightly. Weather was probably a factor in this report.
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