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Non-Manufacturing ISM Comes In At 50.9; Prices Paid Index Tumbles 14%
After a disappointing manufacturing ISM on Thursday, today's ISM non-manufacturing number came in just a touch better than that coveted 50 "expansion" print, at 50.9. How credible this number is will become evident as additional economic data continues trickling in for the third quarter. If upcoming BLS payroll revisions are any indication, expect much more "unadjusted" turbulence ahead.
What was truly notable in today's ISM disclosure was the collapse in the non-manufacturing Prices Paid index, which tumbled a whopping 14.3% in its current read of 48.8 from August's 63.1. Any spin of this data point that does not highlight it for the bright red deflation warning flag it is, would be naive.
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What was the number the market was expectation? Sorry...too many eco-crap data to keep up on nowadays
Not always the most up-to-the-minute expectations, but:
http://www.dailyfx.com/calendar/
Two sources , one stated 50 (optionmonster), another 51 (
BusinessWeek - 1 hour agoTraders were awaiting a report on the September ISM Nonmanufacturing index, which S&P sees rising to 51.0 from 48.4 in August.
, before news broke at 10 a.m.
http://mam.econoday.com/
The data continues apace that indicate outside of petroleum & Chinese pig farming essentials there is next to no support for either raw materials or final demand.
Beat the street's estimate, buy, buy buy!
The song remains the same.
Isn't this good news? Seriously, I get the whole deflation angle, but easing in prices paid is finally a little breathing room versus last month where sales were down and costs were up quite a bit. No margins at all in manufacturing in the last few months.
Actually no. Margins are going to continually get squeezed, this will cause a race to the bottom and will be negative on earnings. I know this well, as I own a small business and I am on this hamster wheel.
From: T. Geithner
To: The Markets
Date: 10-5-2009
Subject: Margins
I have been reading much talk about squeezed margins. So much, in fact, that I feel compelled to take action. After meeting with President Obama, I wish to notify the markets that effective immediately, margins will henceforth be referred to as "titties."
While some could construe squeezing margins as bad, I trust nobody will have that problem with the new nomenclature. At least, that's what the President and I are hoping.
Buy, bye, bye,
Geithner
Oh - no doubt. Lower prices absolutely won't = better margins with reduced demand. There is no pricing power - nothing is selling these days without giving it away.
I've enjoyed hearing the bulls crow the past few months about how the market were climbing a wall of worry. Let's see how those very same bulls climb a wall composed of real economic data rather than hopium, less bad news and wishful thinking.
Don't get me wrong, I want to see the world pull out of the current economic dive. But as a realist, I simply don't see how feeding the alcoholic a lot of the hair-of-the-dog in the guise of liquidity will cure the alcoholic of his/her disease. Looks to me like they would rather mask the problem than deal with it.
That's my view to the T.
And mask it they have. People are visual creatures (RoboTrader will attest to that), and they like charts.
If you're employed, you see the market going up, and hear the politicians testify how everything is gravy, then to you the economy wasn't really broken to begin with. They think the market is a reflection of reality, instead it is a reflection of their delusion.
I like Janet T's analogy of fooling a newborn by throwing a blanket over something & the baby will believe it disappeared. "Peek-a-boo"!
LOL
The unspoken but generally accepted premise one brings to the movie theater is the suspension of disbelief. Other than nit picking truly egregious non sequiturs, to enjoy the movie one must go with the flow and accept what you are seeing and hearing as “fact’ for the duration of the movie.
After 50+ years of indoctrination by television, the default position for the average Joe is that if it's on TV, I'll accept it as fact until told otherwise. Since this person rarely gets his/her "news" anywhere else, he/she never gets the non-confirmation he or she is no longer even looking for.
Like shooting fish in a barrel, the captive audience is told exactly what they wish to hear and see. Ignorance is bliss.
+1
I expect to see enormous pick up in the ism non manufacturing sector as our financial companies have completely healed and they will begin massive amounts of rehiring.
if you don't believe me, just look at BAC/ML's chief equity strategist's prognostications on our financial sector as well as Goldman's outlook.
truthfully, this whole banking "crisis" has been a bit of a menagerie.
disclosure: all in on AIG at 55.90 and adding to position with each and every unemployment check.
Eureka moment! The cash on the sidelines DOES exist- weekly unemployment checks. Gosh, am I too late on AIG? Seems poised to rocket, baby.
plenty of room left on the AIG bus...hop right aboard cuz we are gonna be rich.
I hope you bought tons of COF at the close....we are talking some serious coin here.
So thats good for the markets? Right?
Low rates, no infaltion etc.
An additional concern is that prices paid decreased, yet the employment indicator continued to contract, albeit at a slightly slower pace. Not good.
someone needs to tell the bond market folks that they are making a big mistake.
Isn't that CNBC's number two purpose?
48.8 is only a very mild contraction from last months levels which showed significant growth. Rather than a red flag for deflation it seems to indicate consolidation of last months gains. DId I miss something with this?
IMHO employment is still the number to watch as it is still showing quite serious contraction and was not temporarily "juiced" like manufacturing employment.
Yes, you did miss something but it's because you must
focus on the fact that the BLS is constantly "revising/
adjusting" downward their fictional book-keeping after
massaging the data until it bears little resemblance
to reality - and, that is the point. As CD repeated in
his movie analogy - you must suspend your beliefs to
be seduced by the "official" statistics and, not take
these truths with a "boulder" of salt. You should very
much pay attention to ISM Prices Paid number; even if
it is "off", it is a monthly key metric for deflation.
Secondly, you are "watching" the wrong unemployment
number to show the true devastation that formerly drove
70% of GDP - consumer spending. The U-3 number of 9.8%
is largely fictional because "it" is deemed so important
to markets and consumer sentiment. And it is "juiced" to not look so bad as things really have become. The real
number to focus upon is the U-6 number which is 17%!
This number is a more true indication of the cratering
employment picture and all it's attendant ramifications.
While "massaged", U-6 does at least bear a passing resemblance to the more true number of unemployed.
TD:
Seriously, isn't being a Debbie Downer getting a bit old, no?
Yeah, I know.
Can't we all just cheer a "survey" that "reports" growth in 5 out of 18 industries?
Oh, and don't forget the old "above 50 means ...."
Congrats,
You managed to have a CNBS moment here. If you don't like the truth, present a counter-argument. Otherwise, refrain from name calling, even if it's the ever-lame "Debbie Downer."
I always thought it was "debbie does dallas"? maybe I'm too old
I will brace myself then for the full onslaught of naivety.
I believe the two main areas of growth in the service sector for the month were in Outdoor Firing Ranges and HFT Training Seminars, the two bedrocks of the New Economy.
On a related issue, I checked the historical data on ammunition sales to find similar periods of rapid growth such as the US is experiencing today, and the only one I could find was Beirut in 1975.
Question: Doesn't this data point merely indicate that prices paid jumped in August from July, then slightly contracted in September compared to August? I view this as a healthy correction if that's true.
Edit: What Anon a few posts up said.
Unlike cognitive dissonance, I think i'd rather see a double-dip in order for more cockroaches to be purged from the system.
The casino culture of credit and house prices etc needs to slow down.
Obviously the whales share of this gain is from STIMULI, waiting for a few real news blogs to post these stats . Four legs good , two legs better
Meh, as soon as the auctions are over, equities will resume their march to 1100.
fairly prescient there Andy.....
yahoo finance just reported the 50.9 "expansion" with no mention of the 14% price drop. Apparently to them, the fact that more product is being provided for less money is a good thing. Morons.
"Virtually without exception, hyperinflation arises as a result of a collapse of the currency. It does not stem from demand pull or costs running out of control.
The prerequisites for hyperinflation are a deflationary or non-inflationary recession/depression leading to major government deficits."
http://www.mmnews.de/index.php/200910043905/Gold-Silber/Gold-vs.-Paper-M...
It'll deflate initially but I have to agree with ya. When the currency "collapses" it's a panic run for the conversion to real assets. Dropping gold standard in 70's was just a mini partial window view into a currency "stability" event. A closer look at russia's rubble collapse would be better for understanding that but too many people were just stupidly cheering that instead of watching it closely.
You have to have other countries currencies to defend your own. Just judging by the fed balance sheet. Unless crap from bear stearns and lehman's collaspe are monetizable into foreign currency we have like 0 defensive capability unless you count gold which is probably already gone. We might have alot of yen left over from carry trades but I doubt it. The perversion of foreign things being monetized with dollars is what is tough to understand about it.
I don't want to be a wiseguy, but isn't the prices paid drop 22,66%?
you're cherry picking the data
put it into context within the historical data:
http://metaphynance.blogspot.com/2009/10/cherry-picking-price-data.html
Deflation, I can almost hear the bubble pop.
For posters that just talked about the ISM, wake up - this post is about the PPI!
With final consumer sales discounted heavily to move product to consumers, companies had to go back to suppliers and cut input prices or entire industries and their supply chains would go bankrupt.
Of course, I could see this as a kitchen sink kind of decrease that could purposely be exaggerated (like a reserve) so that future months show price increases (one month down, many months up).
Umm, please correct me if I'm wrong but if prices are falling and inventories are climbing will we see companies moving stock at a loss and/or having 'shelves' full of items that are now declining in value?