Chicago PMI Tumbles As Production Plunges To September 2009 Levels

In what may be a stunning development, today the market may actually respond to an adverse piece of economic news by going lower. The news, in this case was the February Chicago PMI which tumbled from 56.8 to 52.4, the lowest since December and far below expectations of a 56.5 print - the biggest miss in 11 months.

This was driven by a plunge in New Orders which tumbled from 60.2 to 53.0, the most since May 2011, although virtually every other components was ugly: Production posted the weakest print since September 2009, Order backlogs had its ninth month of contraction in the last year, Inventories had their 4th contraction in the last six months, Supplier Deliveries were the longest in 15 months, and so on. Ironically, only Employment was relatively normal dropping a small 0.6 from 55.7 to 55.1.

And for those claiming there is a housing recovery, we present this excerpt from one of the respondents: "a company we buy steel from, they also pre-cut steel for new home construction, back in 2007 they shipped 110 rig packages per week, today they ship 2 rig packages per week, and for carpenters, for one employed there are 15 unemployed." Housing recovery, sure. How about unleashing the millions and millions in shadow units either entering or exiting the jammed foreclosure pipeline, where millions live mortgage free just to avoid an avalanche of selling? Let's see what recovery you have then.

The charts from today's report:

Full respondents comments:

• Things seem to be perking up. We are finally making some investments in our MRP system and plant.
• An observation, a company we buy steel from, they also pre-cut steel for new home construction, back in 2007 they shipped 110 rig packages per week, today they ship 2 rig packages per week, and for carpenters, for one employed there are 15 unemployed
• The corrugated manufacturers have announced another price increase less than 6 months after September 2012. If they are successfull, box prices would be rising 10% this time for a total of 18% in 6 months. Now we see what un-challenged industry consolidation delivers!
• Orders are lighter this month but still flowing in.
• Our business is steady, lots of noise of large orders coming, but still waiting to see them.
• Sales and order backlog declined in February, and March order book starting very soft. We believe it's an exception and seasonality in our business, hope it's not a trend.

Of course, by the time we are done typing this, the market has processed this latest ugly piece of economic data, the third miss so far today, and has resumed its levitation.

Comments

[TeamDepends]

Forward!

[ACP]

In other news, the anger pushes to the next level in Greece with a bomb blast:

http://abclocal.go.com/ktrk/story?section=news/national_world&id=9043452

[NotApplicable]

Gotta love the fool who is blaming price increases on industry consolidation.

[Stoploss]

Hey, house prices are only 180%+ of GDP.

No, no mispricing there..

[Abraxas]

The inmates are completely in charge of the asylum.

[King_of_simpletons]

Great news !! With such strong fundamentals, it is no wonder markets are hitting new highs each day.

[TeamDepends]

Yet another marxist triumph!

[aint no fortuna...]

SPX hits record high on the news, because why the fuck not?

[rogeliokh]

F*cking scam rally again.

[insanelysane]

Speaking of forward, April is going to be a complete shit storm as Easter sales were pulled forward into March.  

This will be the excuse for all data in April so the MSM can refute that 2013 is a repeat of 2012 and 2011.

[1000 splendid suns]

There's been a mispelling in the graph.  It should be 'New World Orders'.  And the arrows are pointing backward not 'forward'.

[caimen garou]

this should push s&p to all time highs

[HelluvaEngineer]

Who needs industry when you have lots and lots of stawks for sale?

[Jake88]

And the prices just keep going up. Ain't life grand.

[Hohum]

Doesn't this number get revised later?  I am sure it will be better.

[Doubleguns]

This after how much pumping for how many years by Benny. Not good!!!

[Abraxas]

You made a typo. It should have read "...after much pimping...by Benny"

[mdtrader]

Markets about to be POMO'd.

[Ness.]

Yup - $5B trumps a horrible CPM on any day that ends in a 'y'.

[madddmaxxx]

I keep hearing Pisani say how calm the markets are. Aren't cattle fairly calm at the slaughter house? I know I shouldn't be watching CNBC anyway.

[rqb1]

It's fun to watch sometimes, like reality tv, but only for a few minutes.

[Cursive]

lots of noise of large orders coming, but still waiting to see them.

Damn, hopium is a strong elixir.

[HD]

"the market may actually respond to an adverse piece of economic news by going lower."

 I no longer understand this concept. Please elaborate. Dick and Jane illustrations would be helpful.

[TeamDepends]

The cat shat in the hat.

[FLUSA.com]

People better get busy building robots to take their jobs, and drones to kill themselves with....

[HD]

http://www.youtube.com/watch?v=SYmYbkdHCBE

[HelluvaEngineer]

We'd better catch up.  Skynet became self-aware on August 4th, 1997.

[natronic]

They are   http://www.rethinkrobotics.com/

[jbvtme]

krugman...any word on this?

[Phroneo]

No.. the SP500 is moving higher! Don't fight the Fed I guess. Stocks will probably goto 1600-1700 either through daily leaks forward or forced nominal appreciation amidst surging inflation (of course officially under 2%),

[DavidC]

A friend of mine was saying earlier that he reckons they'll gun it for a new S&P all time high.

DavidC

[machineh]

Today's intraday high: 1565.09

Oct. 2007 record close 1565.10

This is only a test ...

[mayhem_korner]

I thought the production of emptied handgun rounds was up in the Windy City...

[Manthong]

Back in the old days this would be a good business opportunity..

for a brass recycling business.

But it is Chicago..

In Cook County..

In Illinois.

Boy, talk about three strikes against you..

[asteroids]

After 5 years and trillions in new debt, we have gone..... nowhere. Excellent job FED. Mission Accomplished.

[rqb1]

They saved their banks, their shareholders.  That is what this is all about.

[I Am Not a Copp...]

Oh the market will respond all right.  S&P all time high BITCHEZ!!!!!

[Shizzmoney]

This is all thank to "trickle down consumption":

As the wealthy have gotten wealthier, the economists find, that’s created an economic arms race in which the middle class has been spending beyond their means in order to keep up. The authors call this “trickle-down consumption.” The result? Americans are saving less, bankruptcies are becoming more common, and politicians are pushing for policies to make it easier to take on debt.

If that argument sounds familiar, it’s because Cornell economist Robert H. Frank has been making this case for years. Those at the top are spending more on fancy goods and bidding up the price of homes. In response, the slightly-less-rich have been spending more to keep pace. That pressure, in turn, eventually ripples down to the middle class — where incomes have stagnated of late — in what Frank calls “expenditure cascades.”

“What you think you need depends on the context you find yourself in,” Frank said in an interview. “And standards tend to be local. When most of the income gains are going to the very top, the people around them feel relatively poorer and spend more because of that.”

On its face, that doesn’t sound so terrible. But “trickle-down consumption” can have less-happy side effects too. In an earlier paper, Frank, Adam Seth Levine, and Oege Dijk found that “expenditure cascades” tend to lead to more bankruptcies, higher divorce rates, and longer commutes.

That’s just part of the story, though. In areas where incomes of the top 10 percent are growing, Bertrand and Morse found, the supply of businesses and services that cater to the well-off also increase. Swankier bars replace cheaper bars. Expensive restaurants replace cheap restaurants. Whole Foods nudges out the local grocery store. And less-well-off residents end up spending more at these places.

Keeping up with the Joneses takes a toll.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/27/trickle-down-...

That last sentence, is what will CRUSH demand.  At some point, people realize that debt is NOT their friend......and that will crush neoliberal policy.

[adr]

silly rabbit, you don't need to actually build homes and sell them to push housing stocks to all time highs and beyond. You just need to say you'll build the homes.

You shouldn't need orders to be a profitable company and send your stock to all time highs, you just have your CFO enter the sales on the ledger. Nobody cares anymore, they don't even look for fraud.

Oh, you're a PRIVATE corporation. Ha, sucks to be you. What are you thinking?

[Nail it]

I'm one of those carpenters, self employed for 25 years. That's why I have time to be here today.

[roadhazard]

yep, I made a series of good decisions over my lifetime that enabled me to be able to call it quits just when the crash came. Now the odd job is like found money and goes for more ammo. How much longer, "living the dream" is possible for me is the question.

live a humble life in the woods, your money goes farther.~ roadhazard

[natronic]

Market isn't going lower.  It's acting like normal.  Bad economic news = solid gains!!!  Why is it supposed to go down on bad news?  This is the "new normal"

[SheepDog-One]

Must....buy....CheezyPoofs...

[DavidC]

So, we've had misses on all the figures today and the market is UP?!

DavidC

[RSBriggs]

Yes, the unemployment numbers / productivity don't matter.  What REALLY matters is they ripped off the sheeple in an entire small country, and not a single banker or politician got injured.   The sheeple just took it up the ass, and didn't even complain!

Which means,  a similar ripoff can now be implemented globally and on larger countries like Spain, without having to worry about any annoying consequences (except maybe in the US, where people still actually own those nasty guns...) BULLISH !!

[syntaxterror]

More QE you goddamn muppets! Forward, my bullish flock!

[ebworthen]

WTF!?!?

Simon Hobbs is on CNBC with a Realtor talking about the fancy pants houses in Texas selling like hot cakes!

The recovery is so strong people are getting list prices and the market is hot!

There are no closed banks, capital controls, or higher taxes and premiums!

It's an illusion!  There is no national debt!  Everything is fucking fine!

Og-Gog-Ma-gog!

[AynRandFan]

I just got back from Texas and the economy there is firing on all cylinders.  Elsewhere, not so much.

[brown_hornet]

Nail- I'm with you. I actually have an hours worth of work today. That makes 3 for this week. GREEN SHOOTS!!!

[orangegeek]

Forward this to Ben and Barry so they can spend our tax dollars breathing life into this dead horse of a market.

Here's one - IBM opened down $2.  Within 30 mins it was black.  It's now up about a buck.  Yes, could be one of those "reversals".

But this time around, the volume is a dog and there are massive upper shadows. 

More Orville Redenbacher please.

[nbsharma]

Gun manufacturing will make up for all loss in GDP

[El Hosel]

The Banksters are all flush with cash, buying real estate with the HFT rally profits enginered for and by them and the Fed.... PMI?, bad number? This is good news, 85 Billion is not enough, obviously we will see more.

[Mike in GA]

yeah, and ammo will send us to new highs

[RSBriggs]

If the prices I paid yesterday were any indication, we're already astronomical!

Hey Mike in GA - didn't we work together in New Orleans many many years ago?  39th floor of One Shell Square sound familiar?

[Notarocketscientist]

I'm going to open up CNBS.com....  because I want to have a laugh

[Kreditanstalt]

With "bad" new like this, may I ask why gold is falling?  Why would anyone be selling...even paper gold? 

I guess the mainstream institutional investor idiocy sees this only as some kind of "rough patch" and not the systemic crisis it really is...

No vision.   Forest.  Trees.

[El Hosel]

Gold is "Flight to Quality".... Now that Cyprus banks are open its party time, another Crisis "Fixed".

[Mordenkainen]

Strange days when the mere fact that banks opened pushes stocks higher. Can the bar be set any lower?

[khakuda]

For $85 billion a month, fundamentals don't matter at all.

[Mordenkainen]

Yep, just like as long as there's hot air in your balloon, gravity doesn't matter.

[Haager]

Fundamentals have an influence on the amplitudes of the algo- and QE-driven market. It doesn't change the programming for the index.

[Hongcha]

Sold SLV, small loss, chart breaking down.

Short SPY at 156.50; the news out of China last night was the straw.

[Haager]

SLV is indeed turning lower. But you're a daredevil to short now, in front of a long weekend and beginning of the next month - a year ago markets went up on 2 days before they went bearish.

[Petrus Romanus]

And, on top of all of these stellar numbers the IMF thinks retail gas prices need to be higher:  http://www.washingtonpost.com/business/economy/imf-citing-trillions-in-g... , good job Ms. Lagarde that'll fix the world. Thanks for your leadership and intellect!

[Sigep0612]

The Chicago PMI is contrary to the Empire State Manfacturing Survey which "continues to grow modestly."   Someting fishy eer Lucy.   With regard to housing, I agree that new homes are not being constructed at a pace that would repreesent a robust recovery.  So how come lumber prices are going through the roof? 

However, sales of existing homes are fairly good.  Price increases are not dramatic but fairly representative of a slow growth recovery.  If foreclosures (which represent around 25% of current homes sales) flooded the market, we'd have a ton of homes on the market and continued pricing negativity.  It seems as though the only hope we've got is a recovery in House prices.  I mean, wages aren't going anywhere, the stock market is a bubble propped up by debt to give the illusion of prosperity, and Obama and friends (aka the government) are clueless.  One thing that is finally starting to catch wind is the absurdity of Obamacare.   January 2014...we break wind !