If there was any good news in today's Chicago PMI, it is that the headline number beat expectations of 51.0, rising from November's 50.4, to 51.6, leaving the two months of sub 50 prints in September and October in the past, or so the ISM institute would like us to believe. Because a casual glance at the data reveals that things are actually getting worse, with the Employment index plunging from 55.2 to 45.9, the lowest print in three years, while the all critical Capital Equipment buying policy plunged to a new 28 month low. So much for that CapEx spending. In fact the only indicator that posted an increase in today's release was the New Orders index which jumped to 54.0 while Order Backlogs, Supplier Deliveries, and Prices Paid all dropped. And for those hoping that in Q4 that inventory glut will finally clear itself, we have news: it won't -the Inventory index posted yet another jump, from 47.1 to 49.8. And while the data was ugly, perhaps the saddest, or funniest blurb, came from one of the respondents, which probably captures business sentiment in America with absolute precision: "We are on a hiring freeze in Q4, waiting to assess the outcome of the fiscal cliff deliberations. We are also planning cutbacks due to increased healthcare costs and Obamacare related expenses." Nuf said.
Full respondent list:
- Capital will shift to new products from current product support.
- We have more work than we have people to do build it, nice problem to have, except most of what we have needs to ship before the end of the year, backlog into 2013 is looking strong!
- Lots of uncertainty on 2.3% Medical Device Tax.
- We were forced to reduce staff this month because of weak order intake.
- We have received several smaller orders but some larger orders are still pending. Sales seem to be softening. Let's see what the new year brings.
- Sales and Marketing are expressing to operations our customers are forecasting the market to pick up in 2013, but then again we all know forecasts are 50/50; therefore we'll see, which is exactly where we are today.
- We just acquired a smaller competitor. But business in general is still quiet.
- We are forecasting higher Big Data costs originating from 3 areas. 1. Over the past 24 months we have witness a dramatic rise in the number data intermediaries and middlemen aggregating data and "locking up" access to information. From a procurement point of view, these middlemen are performing a service and building out the data ghettos in places and channels that no one wanted to dive into. Their data products are specialized and difficult to collect and probably deserve their premium prices (for now). Costs are reflective of middlemen with "locked up" access prices keep increasing for data that was previously free, but tough to collect. 2. The large and sole sourced data generators (Big Boxes/Channel Masters) have been rapidly increasing the cost for access to their data and setting more restrictive limits on the usage of their data. 20% YOY increases are not uncommon for basic Big Data access fees. Growing demands for revenue sharing with some approaching 50% of gross revenue.
- Business borrowing remains relatively slow. Credit is difficult to obtain or is relatively expensive for all but the most economically healthy borrowers.
- We are on a hiring freeze in Q4, waiting to assess the outcome of the fiscal cliff deliberations. We are also planning cutbacks due to increased healthcare costs and Obamacare related expenses.