ISM Manufacturing Tumbles - The Weather Bounce Is Over

Tyler Durden's picture

The weather-bounce is over. After 3 months of bounce-back from January's plunge, ISM Manufacturing dropped to 53.2, significantly missing expectations. Across the board the sub-indices were disappointing with rising prices paid (lower margins), falling new orders, falling employment, and falling production. Once again the "meteoroconomists" have outdone themselves as this print was below the lowest estimate (and at the total opposite of Joe Lavorgna's highest of all expectations at 57.0)

 

The actual print was below the lowest Wall Street estimate:

 

Here is what everyone's favorite weatherman said on Friday:

And this:

So... what happens to GDP now?

The component breakdown:

From the report:

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The May PMI® registered 53.2 percent, a decrease of 1.7 percentage points from April's reading of 54.9 percent, indicating expansion in manufacturing for the 12th consecutive month. The New Orders Index registered 53.3 percent, a decrease of 1.8 percentage points from the 55.1 percent reading in April, indicating growth in new orders for the 12th consecutive month. The Production Index registered 55.2 percent, 0.5 percentage point below the April reading of 55.7 percent. Employment grew for the 11th consecutive month, registering 51.9 percent, a decrease of 2.8 percentage points below April's reading of 54.7 percent. Comments from the panel reflect generally steady growth, but note some areas of concern regarding raw materials pricing and supply tightness and shortages."

The respondents, as usual, focus on the silver lining:

  • "Increasing demand for product is creating supply and sourcing challenges." (Food, Beverage & Tobacco Products)
  • "Steel bars required for automotive applications are in high demand. Supply is very tight and prices are increasing." (Fabricated Metal Products)
  • "Aviation is recovering and outlook is optimistic." (Transportation Equipment)
  • "The improving gas prices are positively impacting our short term drilling plans." (Petroleum & Coal Products)
  • "Political issues in Russia are not yet impacting our supply of raw materials from Russian suppliers." (Computer & Electronic Products)
  • "Volumes picking up in some sectors, but profitability still elusive. Suppliers indicate similar difficulties in getting price increases." (Chemical Products) 
  • "Business has remained steady. However, this month has a more subdued disposition by comparison. Price escalation has leveled off with even a few decreases on selected items." (Wood Products)
  • "Semiconductor, oil & gas are very busy." (Electrical Equipment, Appliances & Components)
  • "Business slightly up as anticipated; holding." (Machinery)
  • "Defense industry contracts are shrinking, customer is exercising minimum options, or less than minimum." (Miscellaneous Manufacturing)

Finally, the commodities up in price - pretty much most of them:

  • Aluminum (4);
  • Aluminum Products;
  • Ammonia;
  • Beef;
  • Butter (2);
  • Copper;
  • Electronic Components;
  • Foam;
  • Integrated Circuits;
  • Lumber (3);
  • MRO Supplies;
  • Natural Gas;
  • Nickel (3);
  • Packaging Materials;
  • Plastic Resins (6);
  • Rice;
  • Stainless Steel (3);
  • Steel (6);
  • Steel — Cold Rolled (2);
  • Steel — Hot Rolled (2);
  • Sulfuric Acid;
  • Wood Pallets (2).

Source: ISM