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Goldman On ISM: Disappointing On Weaker Composition
Goldman's Jan Hatzius continues to be one of the most skeptical people when observing recent economic data. His interpretation of today's ISM is no exception. In the meatnime, the market once again doesn't care about anything than a forced headline number (sub 3% 10 Year be damned).
From Goldman:
SA: ISM Survey - ISM Edges Down, but with Weaker Composition; Construction Spending Roughly Flat, From Reduced Base
Actual: 55.5
Previous: 56.2
Consensus: 54.5
Released: Monday, August 02, 2010 at 10:00 (New York time)
ISM Edges Down, but with Weaker Composition; Construction Spending Roughly Flat, From Reduced Base
BOTTOM LINE: ISM index edges down less than expected, but composition is weaker than suggested by this small move. In particular, orders and production post larger declines while the inventory index moves up. Construction spending edges up, but not by enough to offset a downward revision for May.
US-MAP: ISM mfg index -5 (5, -1), with 1 point downward adjustment on composition.
Construction spending 0 (1, 0), with 1-point downward adjustment due to a revision in May.
KEY NUMBERS:
ISM mfg index down 0.7 points to 55.5 in July vs. GS and median forecast 54.5.
Construction outlays +0.1% in June (mom, -7.9% yoy) vs. GS flat, median forecast -0.5%.
MAIN POINTS:
1. Although the ISM manufacturing index came in higher than our expectation and the median forecast, the composition was weaker than implied by the modest setback in the headline. In particular, the orders index fell 5 points to 53.5 and the production index fell 4.4 points to 57.0. Meanwhile, the inventory index rose 4.4 points to 50.2. Although this algebraically added 0.9 points to the change in the composite index, the combination of a falling orders index and a rising inventory index is clearly not positive for future growth in manufacturing output. At 3.3 points, the difference between the two is the smallest since February 2009, four months before the recovery got underway. On the basis of this composition, we have judgmentally reduced by one point what otherwise would be a US-MAP reading of zero.
2. The other two components of the index - subindexes for employment and supplier deliveries, both rose slightly (0.8 point for employment, 1.0 point for supplier deliveries). Both indexes are in the 58-59 range, indicating a positive employment trend in the sector and modest upward pressure on goods prices. Export orders were roughly unchanged (up 0.5 point) while the import index fell 4 points, to 52.5.
3. While the median forecast looked for a decline in construction spending, outlays actually rose slightly by 0.1% in June. However, the May figure was revised down significantly by 0.8 percentage points to -1%. Residential construction spending falls in June (-0.4%) while nonresidential spending is up (+0.4%). Private construction spending falls (-0.6%) and public spending increases (+1.5%). Given the sizable downward revision to the May number, we also judgmentally adjust the US-MAP surprise score down by 1 point
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Party on, Ben! Party on, Timmaaay!!
even stan knows: http://www.youtube.com/watch?v=IPC33lIHJPg
Well, that explains it. I guess this means the market is justified in shooting up 180 points...
Who cares. I just made a vow to stay away from zerohedge for a few months and see if my outlook has changed. Reading this site has cost me dearly.
"Whaa, whaa. I'm going to blame all my shortcomings on reading a free site on the internet. Whaa."
He-man, is it you?
Resort to your tarot cards then, or your homie Helicopter Ben. God forbid there should be a correlation in the market between bad news and a declining stock market.
The whole world doesn't have to fall apart, but I am beginning to wonder when even a modest realization of the underlying factors in this economy will be brought to bear.
Whoever suggested over the weekend that Greenspan's comments would pop the market +200, I salute you sir. Now lets see a realistic revaluation :)
@ trader Timm,
Are you the one who put together the ZH design, using posts? the other day? If so, nice work.
Yep, that was me.
Thanks! But I really have to thank zerohedge in its entirety (founders and forum posters) for inspiring me to make something.
Working on something new, I'll let you guys know...
After the fall election my friend.
China’s Shark Loan Ponzi Finance- As Ponzi Schemes Collapse the Chinese Government Fears Civil Unrest
The collapse of this ponzi scheme at the town level, is a sign that even the bottom part of the hierarchy of the Chinese society was exposed to these schemes. This exposes the pervasivness and seriousness of the shark loan problem. more and more local participated in this get rich quick frenzy since normal business profits wages simply are not enough to make ends meat .
The collapse was triggered by the actions of one of the female ring leaders that turned herself in after she found out she can’t afford to pay the high interest rate anymore.
Though all the “ Mark Organizations’ are run by independent ring leaders, their funds are connected . As a result, after the exposure of her failure, 9 ring leaders are now under police custody. The locals even have a song for this shark loan frenzy:
China’s Shark Loan Ponzi Finance- As Ponzi Schemes Collapse the Chinese Government Fears Civil Unrest
So May numbers are revised down, which make the following months look stronger by comparison, therefore beating estimates.
Utter bullshit.
It's time we force these forecasters to give us their estimates in dollars, not percentages, and we have year over year numbers, not month to month.
Also, factory utilization was higher. How much of this was because Government Motors did not shut down their factories?
I passed several Government Motors vendors this weekend. You could have navigated a semi-tractor and trailer through their lots in figure eights and never scratched a vehicle. It was just that empty.
ISM. Is that in the same category as the dreaded " Death Cross"? What the fuck happened with the Death cross anyway?
It has not been invalidated yet. If my backtest are any evidence, until the death cross (i use MA 30 and 200) has not made an "upward death cross", then nothing is lost for the bears :) and MA 30 is currently at 1080 and MA 200 at 1114,25, thats still a long way to go....
It's simple...stay long until you see a plague of locusts. The only Great Depression that exists today is in your mind. Why all the negativity? Look around you, life is good, open your eyes, the sky is blue, there is no dust storm, there is no cloud of locusts anywhere in sight. Just a few gold bugs gnawing at the alter of imaginary doom.