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Services ISM Plummets: Just 2.8 Points Away From Contraction; Concerns About Fuel And Commodity Costs, And Economic Uncertainty
And scene: as predicted, the US economy is now in free fall (even with QE2 still having two more months to go), validated by today's Services ISM (recall that the US economy is based on "services", not a manufacturing) which plunged from 57.5 to 52.8, taking out consensus of 57.5, and "growing" at the lowest rate since August 2010. As a reminder a number south of 50 means "contraction." From the report: "The NMI registered 52.8 percent in April, 4.5 percentage points lower than the 57.3 percent registered in March, and indicating continued growth at a slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 6 percentage points to 53.7 percent, reflecting growth for the 21st consecutive month, but at a slower rate than in March. The New Orders Index decreased substantially by 11.4 percentage points to 52.7 percent. The Employment Index decreased 1.8 percentage points to 51.9 percent, indicating growth in employment for the eighth consecutive month, but at a slower rate. The Prices Index decreased 2 percentage points to 70.1 percent, indicating that prices increased at a slightly slower rate in April when compared to March. According to the NMI, 17 non-manufacturing industries reported growth in April. Respondents' comments are mixed about overall business conditions; however, they are mostly positive. Respondents' comments also indicate concern over rising fuel costs, commodity costs and the lingering uncertainty about the economy." Virtually every index declined with New Orders plummeting from 64.1 to 52.7 - the biggest drop in history, excepts for Supplier Deliveries (this will certainly drop next month), and Imports.
A quick look at the commodity situation:
Commodities Up in Price
Air Freight; Aircraft Fuel; Airfares (5); Beef; Can Liners; Carbon Pipe; Copper (3); Copper Products (5); Corrugated; Cotton (6); Cotton Products (8); #1 Diesel Fuel (7); #2 Diesel Fuel (10); Freight Charges; Fuel (16); Fuel Surcharges (4); Gasoline (7); Ink Jet Toner Cartridges; Latex Gloves (4); Lube Products; Oil Products; Packaging Materials (2); Paper (6); Petroleum; Petroleum Products (4); Plastics; Plastic Products (2); Plastic Sheet; Polyester Garments (2); Polyethylene Bags (5); Polyethylene Film; Resins; Steel (5); Steel Pipe and Fittings; Steel Products (5); Textiles; Tomatoes; and Transportation Costs.
Commodities Down in Price
No commodities are reported down in price.
Commodities in Short Supply
Cotton (4); Cotton Products; Laptop Computers; and Servers.
And respondents:
- "Business conditions [remain] unchanged. No supply impact from the Japan earthquake/tsunami, but continue to track with the supply base." (Management of Companies & Support Services)
- "Revenues are picking up slowly, but the growth is positive as compared to last month and the same month last year." (Real Estate, Rental & Leasing)
- "Looking forward with reserved caution. Cost of goods by this fall are a big worry." (Accommodation & Food Services)
- "Continuing economic uncertainty will curtail or delay project spending for the immediate future." (Educational Services)
- "Fuel prices continue to be challenging and in addition to shipping, are influencing the cost of materials." (Public Administration)
- "We are seeing price increases in many areas, and the lead times are stretching out. Our business activities are improving at a moderate rate." (Wholesale Trade)
Zero Hedge is now upgrading its keyword for 2011 from staglation to hyperstagflation
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Made a chart prediction of coming gold bubble and its relatively modest (25%) correction before returning to 2000 USD reached in peak:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&p=32176#p32176
Feel free to object based on rational or irrational grounds. There is still time both to join the move up, and to jump the ship at the peak ( October 2011).
This is sooner than even I expected.
Timmay must have phoned in for a 'Hail Mary' play and gotten permission to present the true stats.
Jeetner desperately needs more headroom on that sovereign credit card and maybe doesn't see total rolling over of Congress (yet).
Attention Wal-Mart shoppers:
"A depression that cannot be denied.
Please brace for the stagflation on the way."
Clean-up in the USD aisle.
Hyper-stag-inflationistic-existance-is-atrocious!
Apologies to Mary Poppins.
It's transitory. QE3 and QE4 will be combined to blow your socks off, no worries!
Just a 'double tap' to the heart of whats left of the economy.
Hyperstagflationary-cannot-eat-gold-or-FRNs-spiral-of-doom.
'Because we're living in Depressionary Times' - huh FT?
REITS flat for the day after this, ADP, and now the ISM...
I'm sure they will try to shake out the shorts with a massive shove up at some point.
And so far at least, stocks haven't even been able to turn the bad news into good.
Oh they will figure out something to stay positive.. something like lower ISM numbers are pointing to stablization in the economy or some nonsense like the contraction is actually good for the economy.
Is this the dip I am supposed to buy on?
These numbers are all very, very bullish, and we strongly recommend that our clients remain fully invested at this time...
Is that the deflation monster I hear?
I am topcalling all risk-on trades.
I am on vacation with my ladies these next couple of weeks.
Sold everything except zsl. Just hanging out in cash, but if there is a top to call i will be there, serving truth, justice, and the american way.
Have fun with the Goddesses, Mr. Sheen.
Producer concern regarding commodity inflation ? The Government took this bull by the horns once before, with a unique solution...
Wear it with pride.
http://fitnessachievement.com/wp-content/uploads/2011/02/win-button.jpg
Goes well together with this stock market prediction,as well as recession in the USA in q1 2012:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...
..."and the music keeps on playing on, and on"
∞
∑QEn
n=1
Appropriate music - "Babylon Revisited"...
http://www.youtube.com/watch?v=29PCpGHhtrc
so these planes really are "going to fly high into the night to light the sacrificial rite."
CNBC has Bernanke Speak down pat. There headline uses the word "ISM Eased" instead of tanked or plunged. So ridiculous.
Wait, so it IS TRUE!
Businesses actually worry about and consequently can (and do) get hammered by inflation!
Say it ain't so, Bernank! Say it ain't so!
Margin compression, bitch!
The Bernank can create a parallel universe only for a short period of time, whereby inflation rages along with corporate earnings and equity price action, before The Bernank Universe blows up.
Yeah, just like how a crashing plane "eases" into a mountain and bursts into flames, I mean, "warms".
Several days of snow in early April
Funny how the worse the economy gets, the GDX crashes even faster.
Poor General Jim got it all backwards. The worse the economic stats, the worse the prospects of the HUI, and the XRT retail index remains even more resilient.
Here's proof:
Momofader, have you been banging 7 gram rocks again? General Jim is laughing at you F12 punching TZOO all the way down. You'll never be a real pigman. lulz
You should throw up a chart of BIDU. It's gotten crushed the past couple days.
All of momo's favorite stocks are getting crushed. Why do you think he won't post the charts?
RoboTard had his mom invest her life savings in BIDU & NFLX.
She'll be eating Alpo at this rate. Your mom says thanks a lot, Robotard,
Nice demonstration of how these broken markets mis-allocate capital.
Good point that no one gets. Personally, I think it's a 100% political economy now. No one invests a penny without checking the latest government interventions.
RainbowTrader how about a chart of your TZOO?
To defend RobotTrader, in the short term at least a further decline in GDX is (in my opinion) at least and probably more likely than a resumption of an uptrend. It makes sense to get out of mining stocks and wait and see what happens.
Signs of the "leakey bucket" are everywhere, from Mike Duke seeing cash-strapped customers at Walmart to ever-rising numbers of Americans on Food Stamps. It all reminds me why the term "recession" was created: people were so tired of the term depression during the last great collapse that journalists needed another term to describe yet another down cycle in the economy.
It takes a long time to fix all the holes the Federal Reserve and member banks have shot in the global and US economies.
Welcome to the Recovery
Just in time for the Administration's new, sure to be blockbuster release, directed by Joe Biden:
"Recovery Summer II -- Are You In ?"
Over at the BlowHorn [CNBC], the reaction is, "ISM who?"
Better things to talk about like teen retailer stocks and business surveys.
I can just picture Erin going 'ISM? Who is that another Saudi prince I need to fly over to meet and blow'?
Yes specialty coffee, $7 4-pack sodas, and $9 burrito stocks are all that matters now.
gold down on all the good news.
PLUMMETS!?!?! LOL!!!!!!!! You must be the worst economist ever! Economics 101: It's a frigging diffusion index and a reading above 50 still signals expansion, not contraction. PERIOD! Plus, who cares about ISM services? It's volatile and useless at predicting trends in service employment, which is what ultimately matters! Keep buying the dips, ya ZH doomsayers!!!
Poor Leo...I mean....its just sad.
Keep buying greek debt Leo.
I see Leo K asked to have his 'pension fund managers are underpaid' whine-article taken down after I responded by instructing him that they're actually far overpaid, and that 99.5% of pensions would do FAR better to simply invest in Vanguard No-Load Index/Bond/World Funds, and just sit tight, than pay 'churn and burn' pension managers outrageous fees and commissions to underperform 'throwing darts.'
I also see that Leo is either hungover or debilitated in another manner as he fails to comprehend:
Leo
Show us you investments of the decade. The place where all the hedgies are investing. Econ 101 says broke goverments cannot prop the industry up. Please show a solar chart.
Leo, I think Tyler meant that the rate of change of the ISM services index is plummeting.
Welcome to life post-Peak. A constant state of economic crisis.
Well, yes, CRISIS. The growth machine requires nonstop MORE of everything and we simply can't do that any longer. So the machine is thrashing.
As our money is debt and debt's viability rests upon a future of principal + interest (aka, "more"), it must be discounted to reflect the reality of a future of less.
The bernank and the rest of the economist idiots were hoping that they could "stimulate" more oil out of the earth via shit like interest rates. No dice. Next time they should try stimulating gravity lower or maybe make the sun stay up longer; it'll have the same effect.
I mean wake the fuck up people...gasoline is FOUR dollars per gallon now. Given that wages have gone down for regular people for decades, how the fuck much longer before REAL choices have to be made, household-by-household, on how much "GDP" they can generate? The elites can just print fresh dollars for their gasoline (sort of how the USA has worked vis a vis other countries since the 70s), but the regular folk cannot.
People who are kvetching over the dollar's decline as if the QE *now* is responsible???? Pull your heads out. Decades of systemic, megabillion $ trade deficits have created massive amounts of dollars everywhere. Without the petrodollar, our FRN would have collapsed 30 years ago. That is what the gold and silver spikes back in the day were ABOUT and the runaway inflation- the FRN was IN COLLAPSE. They only rescued it back from the brink via unholy alliance with the House of Saud.
The dollar legitimately SHOULD BE far lower than it is given our trade balance. Any other nation with our trade picture would have a literally worthless currency now. Think about that. I mean look at current accounts deficits worldwide...we're so absurdly #1 in the negative, and we're down there with all the other western states. Also look at AUD and CAD sitting down there, these supposed strong currency resource exporters- they've already SPENT their surpluses.
Excellent points... the current $ debauchery builds on top of past $ debauchery... and Saudi Arabia is the linchpin of many, many houses of cards. Can't wait for the Koran-thumpers over there to topple the whole rotten edifice, THEN we'll be cooking with gas...
FYI, I'm Bullish PM's, but I have to say I enjoy your perspective on Zero Hedge. I agree with what you just said. It seems only a matter of time before the "depression" hits main street. Right now the people I know that arent on welfare are planning for the worst. My Renters and other welfare neighbors are on food stamps, but manage to buy new cars and drugs at the same time....it cannot keep going like this.
removed
Ding ding ding !!..We have a winner! Peak is the underlying current to the ocean of shit we are witnessing. I heard a report this morning on the radio..Demographers have apparently miscalculated the population projections and now think that we will have 10 billion mofo's by the end of the century! Also noted the EU says its time to take action on PO.
http://www.euractiv.com/en/energy/act-peak-oil-curtail-mobility-commissi...
That rumbling sound you hear? That's all that you think you know about our world and economics and civilization being squashed under the wieght of reality.
Trav, spot on and well said.
What we need is a planet just like earth in place of our moon, then
we could continue this exponential growth a little longer.
But we don't, so plan accordingly.
I think the U.S. is heading for an Argentina-type currency crisis where in a very short timeframe, days or a few weeks, people will wake up and whatever wealth they thought they had in terms of purchasing power will be cut in half or more.
Maybe some are missing a key point here (or maybe I am misinterpreting):
First, this is well stated.
Second, I think the significant point is that not only can further QE NOT produce a positive ISM (or any other, save inflationary) trend, but that additional QE of any significant size (along with Nurse ZIRP) is THE CAUSE OF THE DOWN TREND & very real possibility of future contraction.
QE, the bell tolls for thee?
Agreed.
Like anything else, QE has an opportunity cost attached to it. Yes, it is fiat, but, right now, fiat does have value. QE is the creation of capital, and the allocation of capital to the prop desks of TBTF banks. The speculators then bid up commodities, causing inflation. Margins get compressed, or they evaporate, as the middle class lacks the money to accept price increases. Business activity declines.
It would be different if the QE money could be funneled through some other program that actually increased real world business activity (easier said than done). The Fed apparently felt more comfortable just giving the money away to their member banks for securities speculation.
Perhaps this is a reaction to, or an indication of, such severe structural problems in the US economy that there is no point in even considering making loans to the business community or to consumers, unless they are part of that 1% holding most of the wealth.
USD down, silver down.
Negligible impact on equity markets as the S&P is not even down 1% on the news. The markets have run up so sharply over the past several months that even a 5% pull back will have us sitting over 12,000 on the DOW. This market has been and continues to be a complete joke, underreacting to bad news, while overreacting to good news. A 10% miss on ADP and 8% miss on ISM services, the largest sector of our economy cannot even push the market down 1%.
Thats simply because the only ones now in the market are Timmah and Ben, churning the 401K bathrobe brigades statements higher to keep them placated a bit longer. Nothing but a joke.
... but corporate EPS are strong... high oil prices and high food prices are caused by strong organic growth in demand... the unemployment rate fell to under 9%... LobotomyTrader posts bullish stock charts on ZH...
100% FUBAR Ponzi ecomony
BIDU testing the 50-day. Where's the chart?
MickeyD's needs to hire more and expand to those conquered nations we control. lol
not enough QE, please send to all keynesian bastatrds!!
Leo
Show us a chart of your solars. This is where all the hedgies are hiding. Best investment since dot-bomb.
This is bullish!