ISM Beats Expectations On Surge In Inventories

Tyler Durden's picture

While the baffle with BS theme was strong earlier, when the UMich consumer confidence soared, rejecting the plunge in the consumer confidence tracked by the Conference Board, contrary to our expectations, the manufacturing ISM did not do a "China", which last night was reported to have grown and ungrown at the same time, did not drop to disprove yesterday's Chicago PMI and instead soared to 53.1 from 50.2, well above the expectations of a 50.7 print, and above the highest Wall Street estimate. This was the biggest beat of expectations in 16 months, and was driven by virtually every series rising except for Exports and Deliveries, but mostly by a surge in Inventories, which soared from 43 to 51.

From the report:

"The PMI™ registered 53.1 percent, an increase of 2.9 percentage points from December's seasonally adjusted reading of 50.2 percent, indicating expansion in manufacturing for the second consecutive month. The New Orders Index registered 53.3 percent, an increase of 3.6 percent over December's seasonally adjusted reading of 49.7 percent, indicating growth in new orders. Manufacturing is starting out the year on a positive note, with all five of the PMI™'s component indexes — new orders, production, employment, supplier deliveries and inventories — registering above 50 percent in January."

Visualizing the move:

Summary of the January report:

The ISM respondents are at best unclear on what the future holds:

  • "Fiscal cliff, uncertainty in general and EU economic weakness are factors causing our customers to be very tentative with commitments for product purchases in 2013." (Machinery)
  • "Midwest drought impact will be felt at least through midyear, impacting protein, sweeteners, eggs, oils, emulsifiers, etc." (Food, Beverage & Tobacco Products)
  • "Slowing interest in high-dollar purchases reflects continuing economic uncertainty." (Miscellaneous Manufacturing)
  • "Expenditure and investment are expected to remain high in North America in Q1 and Q2, 2013." (Petroleum & Coal Products)
  • "Housing sales are trending upward in light of overall market uncertainty, translating to improving optimism in appliance market." (Electrical Equipment, Appliances & Components)
  • "Still waiting for reaction to consumer tax increases." (Fabricated Metal Products)
  • "Government spending is very low, probably due to the fiscal cliff and the looming debt ceiling." (Transportation Equipment)
  • "Business is improving." (Furniture & Related Products)
  • "The general theme developing in our industry is that we can move suitable volumes. However, profit margin is elusive." (Wood Products)
  • "Overall production volume decreasing. Decrease is led by decline in exports of 10 percent." (Chemical Products)