Baffle With BS: After Chicago PMI And Durable Goods Tumble, Manufacturing ISM Soars

Tyler Durden's picture

When in doubt, baffle with bullshit. Just a day after the Chicago PMI posted its biggest collapse in years (not to mention the absolutely horrendous Durable Goods number), leading everyone to believe that the ISM, and Q3 GDP will be absolutely abysmal, here comes the Manufacturing ISM number, printing far above expectations of 49.7, and well above the last print of 49.6, and in fact posting its first increase since May of 2012. This means that the ISM to Chicago PMI gap is now the widest since September 2009. Perhaps the White House's Alan Krueger had run out of explanations for why the economy is collapsing into Q4, and finally made sure going forward all economic data will be better than expected. At least until the election of course. The biggest movers in the September ISM print: New Orders, Prices, and Employment, all of which posted numbers solidly in the 50+ range. Now we look forward to either an epic beat in the Services ISM next, or a complete collapse to continue treating everyone like mushrooms. In other news, construction spending plunged to -0.6% from -0.4%, on expectations of a +0.5% increase. But who cares: today housing is irrelevant as somehow the US manufacturing industry is improving, all other signs to the contrary be damned.

The ISM table:

From the report:

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI™ registered 51.5 percent, an increase of 1.9 percentage points from August's reading of 49.6 percent, indicating a return to expansion after contracting for three consecutive months. The New Orders Index registered 52.3 percent, an increase of 5.2 percentage points from August, indicating growth in new orders after three consecutive months of contraction. The Production Index registered 49.5 percent, an increase of 2.3 percentage points and indicating contraction in production for the second time since May 2009. The Employment Index increased by 3.1 percentage points, registering 54.7 percent. The Prices Index increased 4 percentage points from its August reading to 58 percent. Comments from the panel reflect a mix of optimism over new orders beginning to pick up, and continued concern over soft global business conditions and an unsettled political environment."

 

PERFORMANCE BY INDUSTRY

 

Of the 18 manufacturing industries, 11 are reporting growth in September in the following order: Textile Mills; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Wood Products; Apparel, Leather & Allied Products; Paper Products; Petroleum & Coal Products; Primary Metals; Fabricated Metal Products; Furniture & Related Products; and Miscellaneous Manufacturing. The six industries reporting contraction in September — listed in order — are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Machinery; Chemical Products; and Computer & Electronic Products.

The respondents show some bullishness. Well, 3 of 9 do... Still 33% is better than nothing when you have a reelection campaign on.

  • "Appears that our so-called 'slowdown' was a summer thing. September brings with it increasing requirements and business." (Paper Products)
  • "Business improved through Q3, but is beginning to show signs of slowing down in Q4; this has been a typical trend over the last few years." (Wood Products)
  • "Business has picked up going into the last quarter." (Plastics & Rubber Products)
  • "We are sticking to our manufacturing plan, but have slowed production down considerably. Haven't added any new units to the 2012 plan, and still have no forecast for 2013 released." (Computer & Electronic Products)
  • "Sales have tanked over the last two months, bringing a very concerned and stressed management team. Not very optimistic for the near-term future." (Apparel, Leather & Allied Products)
  • "Uncertainty in the healthcare legislation (reform) continues to be the underlying force keeping our sales revenue below its full potential." (Miscellaneous Manufacturing)
  • "Steel and aluminum prices still dropping, and auto production orders are up." (Transportation Equipment)
  • "Domestic business is up; international is down." (Electrical Equipment, Appliances & Components)
  • "Demand seems to have stabilized from August. New orders are appearing this month without advanced notice from our customers." (Chemical Products)

And so on. Futures, naturally, explode as a wave of short covering washes out all the brand new weak hands.