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Manufacturing ISM Drops To 53.6 From 55.7, Comes Below Expectations; Double-Dip Threat Looming
The Novermber manufacturing ISM dropped to a below expected 53.6, down both relative to October's 55.7, and to expectations of 55. Another 3.6 point drop and we are well on our way to a double dip, which is a certainty anyway once the administration stops subsidizing a major portion of the GDP.
From the report:
Economic activity in the manufacturing sector expanded in November for the fourth consecutive month, and the overall economy grew for the seventh consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.
The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “The manufacturing sector grew for the fourth consecutive month in November. While the rate of growth slowed when compared to October, the signs are still encouraging for continuing growth as both new orders and production are still at very positive levels, and the Prices Index fell 10 points, signaling less inflationary pressure on manufacturers’ costs. Overall, the recovery in manufacturing is continuing, but many are still struggling based on their comments.”
PERFORMANCE BY INDUSTRY
In November, 12 of the 18 manufacturing industries reported growth. The industries — listed in order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Petroleum & Coal Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Transportation Equipment; Chemical Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Paper Products; Fabricated Metal Products; and Machinery. The five industries reporting contraction in November are: Wood Products; Furniture & Related Products; Nonmetallic Mineral Products; Primary Metals; and Plastics & Rubber Products.
WHAT RESPONDENTS ARE SAYING …
- “Becoming concerned about the value of the U.S. dollar.” (Apparel, Leather & Allied Products)
- “Low value of the dollar driving commodity costs higher.” (Food, Beverage & Tobacco Products)
- “Demand from automotive manufacturers remains strong and building.” (Fabricated Metal Products)
- “Capital construction seems to be picking up, and we are seeing more jobs that are bid out.” (Electrical Equipment, Appliances & Components)
- “Steady increase in business.” (Primary Metals)
COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY
Commodities Up in Price
Aluminum (5); Copper (6); Copper Based Products (5); Natural Gas (2); Oil; and Steel (5).
Commodities Down in Price
No commodities are reported down in price.
Commodities in Short Supply
Electronic Components is the only commodity reported in short supply.
Note: The number of consecutive months the commodity is listed is indicated after each item.
NOVEMBER 2009 MANUFACTURING INDEX SUMMARIES
PMI
Manufacturing growth decelerated in November as the PMI registered 53.6 percent, a decrease of 2.1 percentage points when compared to October’s reading of 55.7 percent. This continues the recovery in the sector, but at a slower rate of growth. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
A PMI in excess of 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the seventh consecutive month in the overall economy, as well as expansion in the manufacturing sector for the fourth consecutive month. Ore stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through November (45.4 percent) corresponds to a 1.3 percent increase in real gross domestic product (GDP). However, if the PMI for November (53.6 percent) is annualized, it corresponds to a 3.9 percent increase in real GDP annually."
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Bloomturd: "...today's ISM's report definitely points to strength. The ISM's manufacturing index did fall back 2.1 points to 53.6..."
And this follows the Chicago Activity Index slid to -1.08. Isn't -.7 considered economic contraction?
Let's see how this will be interpreted by Benny and Larry; manufacturing ISM is down, therefore we need to crash the dollar some more so manufacturing exports will go up. Hey, there's a plan.
All I see over at Associated Propaganda is a huge honkin' headline that reads: "October pending home sales rise 3.7 percent".
Staffers furiously working on catchy title for "Cash for Nonmetallic Mineral, Plastics, Rubber, Furniture & Related Products and Primary Metals" program.
Email suggestions to Keynesredux@whitehouse.gov
Just to be funny I emailed a smart ass suggestion to Keynesredux@whitehouse.gov...
Some guy named Rahm E-something fired back that this was a security restricted internal government email address and that he was going to place me on the "Terrorist Watch List" and have Homeland Security investigate and monitor all my internet activity...
From a manufacturer regional sales manager involved in the included industries:
Petroleum & Coal Products; Miscellaneous Manufacturing; Electrical Equipment, Transportation Equipment; Food, Paper Products; Fabricated Metal Products; and Machinery (other industries to a lesser degree of n/a)
We are a provider of capital equipment specializing in heavy industry. Analagous to a baker will always need flour to bake bread - they just don't require a new oven - and should their oven break down, there's countless available on the used market (consolidation of failed bakers).
We raised our red flags in April of 2008 (Dow Jones close of 12,500-13,000 range), at which time, major capital projects were becoming delayed/postponed or cancelled. From that point we saw decreases in capital equipment purchases fall from approximately June 2008 to November 2008 by approximately 50%. Estimated capital equipment sales from November 2008 to November 2009 currently stand at approximately 25% of anticipated sales projections (from October 2008).
It's been a long tough road. Where do things stand now?
Worse. Much worse. At current sales projections of equivalent shipments of 2009 (25% of original forecast) - our current backlog stands at 4.5% of required backlog to satisfy bank covenants. Our manufacturing sales representatives indicate that what we see is across the board from their principals in related industries.
I have always interpreted the saying that the market can remain irrational longer than you can remain solvent to be indicative of investments - not staying in business. I was wrong.
Thanks for sharing that Jeff, very interesting. Nice to hear truth for a change.
New orders increased while inventories decreased and prices went down. I can see that as a trend for more new orders, however decreased employment is an issue.
Many companies pay severence when they are being let go, so it would be curious to have a breakdown of severence pay ranges per industry per state and contrast that with unemployment vs new sales per industry per state.
... and can we say, 2nd stimulus proposal, or if I may, PORKacus MAXimus:
"I wouldn't characterize it as a second stimulus," House Majority Leader Steny Hoyer said Tuesday. "I don't want to be as broad as that, I want it to be very targeted on jobs."
What, so did you change your mind? When the stimulus package came out it was all about putting America back to work! Now you are saying that perhaps since it did not really create many jobs, that to call it a similar name is a mistake. No the mistake is not to recognize that you failed on the first try, and that you should not compound this lunacy, by making the same mistake twice.
Let me ask the obvious question.
What qualifies these guys to do anything?
They want another jobs package, great, and how are you going to pay for this without destroying the last vestiges of the USD. When will they realize they cannot spend any more money without debasing the USD? Pehaps, when Treasury auctions are less than 1% successful? Idiots.
My advise would be, they should wait to see what jobs are created in 2010 from the first stimulus. Before destroying any confidence left in the USD.
Mark Beck
Double dip? Are you sure? A reading above 50 signals expansion and new orders are surging. You guys have to call it like it is, a positive for manufacturing sector. Also, ISM employment is poorly correlated to payrolls so don't read too much into this sub-component.