The first two economic indicators of 2013 are in and are a beat and a miss. The beat was in the December ISM Manufacturing printed at 50.7, higher than the 50.5 expected, and up from November's 49.5. This is happening even as 7 of the 18 manufacturing industries in December report growth while 9 reported contraction: go figure. Looking at the component data, New Orders remained flat at 50.3. The index was driven higher by Backlog of Orders +7.5, Exports +4.5, Supplier Deliveries +4.4, Employment +4.3, and Prices + 3.0. The declines were in Inventories and Production, down -2.0 and -1.1 respectively. The miss was in November Construction Spending, which printed at -0.3%, down from a downward revised October 0.7% (from 1.4%), and well below expectations of a 0.6% print: this was the biggest miss in 10 months, and the first negative print in 10 months, which however will likely be blamed on Sandy.
And Construction Spending:
The ISM table:
The funny stuff: 7 industries posting growth, 9 reporting contraction:
Of the 18 manufacturing industries, seven are reporting growth in December in the following order: Furniture & Related Products; Paper Products; Petroleum & Coal Products; Wood Products; Primary Metals; Computer & Electronic Products; and Food, Beverage & Tobacco Products. The nine industries reporting contraction in December — listed in order — are: Nonmetallic Mineral Products; Chemical Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Fabricated Metal Products; Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components; and Apparel, Leather & Allied Products.
And the always entertaining respondents:
- "Many Chinese sources are coming to us with cost reductions to maintain their current business volumes." (Machinery)
- "Saw some stronger than expected demand in October and November, but December demand is weak comparatively." (Food, Beverage & Tobacco Products)
- "We are seeing stabilization of orders and costs as well as production capacity for the first time in months." (Miscellaneous Manufacturing)
- "We are experiencing a mix of results — domestic up year over year for industrial business, down in retail and down in LATAM, EU and Asia. Next year is anyone's guess — has never been so unpredictable." (Apparel, Leather & Allied Products)
- "Black Friday was good, but forward economic visibility is foggy." (Computer & Electronic Products)
- "The election is over; unemployment is dropping; consumer confidence is increasing as are home sales prices. We seem to be turning the corner. New car sales are increasing, which affects our customers." (Fabricated Metal Products)
- "Business conditions have flattened out since last month. Overall production has leveled off from their previous reduction last month." (Transportation Equipment)
- "Business is strengthening." (Furniture & Related Products)
- "Prices and orders are staying stronger than normal for December — a pleasant surprise." (Wood Products)
- "Uncertainty in additional government regulations and tax climate seems to be slowing orders." (Chemical Products)
And so on.
Since the news came wrapped in a flashing red headline, the algos took the very mixed data and ramped stocks even higher.