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Chicago PMI Collapses To 13-Month Lows, Biggest Miss On Record

Tyler Durden's picture




 

We warned last month that under the covers Chicago PMI looked a lot weaker than the headlines and this morning's collapse confirms that. Against expectations of a small rise to 63.0, Chicago PMI plunged from 62.6 to 52.6 (13-month lows) for the biggest miss on record. According to the release itself, "A monthly fall of this magnitude has not been seen since October 2008 ." The was an 8 standard-deviation miss from analyst expectations (Joe Lavorgna was on the high side at 63.0). New orders, inventory, production, order backlogs, and prices paid all dropped (but employment rose?). This is the biggest 2-month drop since Lehman (and 2nd biggest since 1980). We await the seasonal adjustment "correction" as MNI get the call from Yellen.

 

 

This is the biggest 2-month drop since Lehman (and 2nd biggest since 1980).

The breakdown:

  • Forecast range 60 - 65 from 47 economists surveyed
  • Prices Paid fell compared to last month
  • New Orders fell compared to last month
  • Employment rose compared to last month
  • Inventory fell compared to last month
  • Supplier Deliveries rose compared to last month
  • Production fell compared to last month
  • Order Backlogs fell compared to last month

Of course, very quick damage control was needed and sure enough:

In spite of the sharp decline this month, feedback from purchasing managers was that they saw the  downturn as a lull rather than the start of a new  downward trend. This was especially so given the recent strong performance and the fact that Employment managed to increase further in July.

Cognitive dissonance much? Because at the same time:

Nonetheless, following a strong Q2, this was clearly a poor start to Q3 and as such tempers some of the increased optimism in recent months. Production’s large decline in July left the indicator barely in expansionary territory and at a two year low, although this followed a very strong run with output above 70 in June. New Orders, the most heavily weighted component of the barometer, saw its biggest monthly set back since November 2013. Order Backlogs, which have expanded in every month since last October, fell into contraction in July.

Also, kiss the inventory-driven GDP expansion goodbye:

Growth in inventories eased in July from a seven  month high in June, while Prices Paid fell for the  second consecutive month but remained well above 50.

In conclusion:

Commenting on the MNI Chicago Report, Philip  Uglow, Chief Economist at MNI Indicators said, “The surprise fall in the Chicago Business Barometer in July,  following a strong second quarter, naturally raises questions about the sustainability of the recovery. Some feedback from panellists points to this being a temporary setback, although we’ll need to see the August data to judge to what extent this is a blip“.

Charts: Bloomberg, source: PMI

 

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Thu, 07/31/2014 - 09:57 | 5026977 SandiaMan
SandiaMan's picture

Onward thru the fog

Thu, 07/31/2014 - 09:59 | 5026991 ilion
ilion's picture

Definitely bullish.

Thu, 07/31/2014 - 10:01 | 5026999 kliguy38
kliguy38's picture

any more green shoots and they'll have to order a lawn service in

Thu, 07/31/2014 - 10:05 | 5027010 Leonardo Fibonacci2
Leonardo Fibonacci2's picture

Isn't Obama from Chicago? Har-har-har.....

Thu, 07/31/2014 - 10:07 | 5027016 Sudden Debt
Sudden Debt's picture

no... not really... you racist... you know all to well that all the best presidents in history came from Kenia or Hawaii...

and if you don't agree with me it's because you must be a KKK member!

Thu, 07/31/2014 - 10:13 | 5027030 Leonardo Fibonacci2
Leonardo Fibonacci2's picture

Har-har-har.....lol Good one!!!

Thu, 07/31/2014 - 10:23 | 5027093 max2205
max2205's picture

Chicago blows cause Canada sucks

Thu, 07/31/2014 - 14:17 | 5028294 dizzyfingers
dizzyfingers's picture

No, he is NOT "from" Chicago. Born in Hawaii.

Thu, 07/31/2014 - 10:05 | 5027008 Sudden Debt
Sudden Debt's picture

It dropped so much because the US economy grew +7% in the second quarter!!!

3 TIMES FASTER THAN WHAT THE CHINESE EVER DID IN THEIR BEST YEAR!!!

Thu, 07/31/2014 - 10:00 | 5026992 SHEEPFUKKER
SHEEPFUKKER's picture

Must have been the wind in the city

Thu, 07/31/2014 - 10:02 | 5027000 Sudden Debt
Sudden Debt's picture

THAT WAS NOT JUST WIND!!!

 

IT WAS THE SHARKNADO!!!

 

http://www.google.com/imgres?imgurl=http%3A%2F%2Fresources3.news.com.au%...

some movie pics... :

http://www.google.com/imgres?imgurl=http%3A%2F%2Fimgick.nola.com%2Fhome%...

http://www.google.com/imgres?imgurl=http%3A%2F%2F3.bp.blogspot.com%2F-bj...

 

This movie is so real looking, it's like watching a wallstreet docu!

Thu, 07/31/2014 - 10:26 | 5027102 BringOnTheAsteroid
BringOnTheAsteroid's picture

When people start posting links to Sharknado I must question how seriously they are taking this market.

Thu, 07/31/2014 - 10:29 | 5027113 Sudden Debt
Sudden Debt's picture

and yet your avatar is a asteroid...

Thu, 07/31/2014 - 10:35 | 5027130 Headbanger
Headbanger's picture

Moar like a hemorrhoid.

And now the S&P is breaking below the 50 DMA

http://www.marketwatch.com/investing/index/SPX/charts?symb=SPX&countryco...

Thu, 07/31/2014 - 11:32 | 5027430 SAT 800
SAT 800's picture

Pardon me, but you're hardly the one to be commenting on Avatars.

Fri, 08/01/2014 - 02:12 | 5031473 BringOnTheAsteroid
BringOnTheAsteroid's picture

Forgot the /sarc tag. It's just the mention of Sharknado I figured circumented the need for the tag.

Thu, 07/31/2014 - 10:01 | 5026997 slaughterer
slaughterer's picture

PMI and other real economic, political, health and ecological reality does not matter when the market is giving the "money on the sidelines" a dip to buy.

Thu, 07/31/2014 - 11:31 | 5027424 SAT 800
SAT 800's picture

Just keep repeating that over and over; maybe it'll make you feel better.

Thu, 07/31/2014 - 10:21 | 5027081 TideFighter
TideFighter's picture

Oh, oh, the Market is UNSTAYBULL? 

Thu, 07/31/2014 - 11:34 | 5027439 SAT 800
SAT 800's picture

Vorwarts into oblivion, Kamerades !!

Thu, 07/31/2014 - 09:57 | 5026978 johand inmywallet
johand inmywallet's picture

SNAFU, PRINT MOAR BITCHES!

Thu, 07/31/2014 - 09:58 | 5026986 Citxmech
Citxmech's picture

But consumer confidence is so high - I don't understand. . . 

Thu, 07/31/2014 - 10:11 | 5027022 Ms. Erable
Ms. Erable's picture

Well... some of the consumers are high. I wonder if hopium addiction can be treated with methadone...

Thu, 07/31/2014 - 10:25 | 5027099 BurningFuld
BurningFuld's picture

Yes consumers are very confident they are fucked.

Thu, 07/31/2014 - 10:22 | 5027082 ImReady
ImReady's picture

...and we had 4% GDP...Whats going on? I'm confuzed!

Thu, 07/31/2014 - 10:32 | 5027121 BringOnTheAsteroid
BringOnTheAsteroid's picture

TPTB have given up trying to make all these economic numbers hang together. At least at the beginning of the GFC Bernanke had a spreadsheet of all the economic indicators that are reported. Problem is he didn't leave any doco for Yellen so she doesn't know how to work it.

Thu, 07/31/2014 - 09:57 | 5026980 Bosch
Bosch's picture

One might say that it is dropping like Chicago's young black males.

Thu, 07/31/2014 - 09:58 | 5026982 Bill of Rights
Bill of Rights's picture

Sell gold!... all day every day .....ridiculous.

Thu, 07/31/2014 - 09:58 | 5026987 ekm1
ekm1's picture

Even "offishull" data shows output collapse.

World trade is dying due to excessively excessive excess of USD reserves.

 

Misery is expanding, until brute force is applied on bank lobby, and it will, unless they surrender

Thu, 07/31/2014 - 10:41 | 5027170 Everybodys All ...
Everybodys All American's picture

ekm ... I wonder what your opinion is on the Federal Reserve in regard to the tapering. Is it real in your view? Are they really tapering or better yet who is it that is buying Treasuries out of Belgium of all places? How will or do they continue to hold interest rates down so that their balance sheet isn't upside down in the coming months. Is it now a matter of watching it all fall apart in the stock market to force people in to this Treasury market as a safe haven?

 

Thu, 07/31/2014 - 09:59 | 5026995 LawsofPhysics
LawsofPhysics's picture

Deflation in everything you don't need for survival.  Inflation in everything else, "winning".

Thu, 07/31/2014 - 10:02 | 5026998 RiskyBidness
RiskyBidness's picture

C'mon Yellen.......You can't stop the Glory Hole Now.......

Thu, 07/31/2014 - 10:03 | 5027001 GOLD AND SILVER...
GOLD AND SILVER NATZI's picture

Bullish!!  This is just noise!!

Thu, 07/31/2014 - 10:07 | 5027012 Kreditanstalt
Kreditanstalt's picture

Sell everything...!   Buy paper dollars...!

Thu, 07/31/2014 - 10:06 | 5027013 Downtoolong
Downtoolong's picture

Joe Lavorgna was on the high side at 63.0

But, if I’m wrong next month on the downside by as much as I was wrong this month on the high side we will be in the strongest economy since post WWII, and if there is one thing for sure I can be wrong…… or something like that …shit, now I’ve even confused myself….. just BUY suckers.

Joey

Thu, 07/31/2014 - 10:07 | 5027015 Kina
Kina's picture

If I were the US I would do something to damage the economy some more, like ..say....get Russia to ban US companies and products, that should help....and also help raise the price of fuel through Ukraine and ME tensions.  Check...well on the path

Thu, 07/31/2014 - 10:09 | 5027018 riot-police
riot-police's picture

I can't believe they did not fudge this number more it looks kinda bad for the spin docktors. Somebody is going to get a phone call!

Thu, 07/31/2014 - 10:12 | 5027024 Kaiser Sousa
Kaiser Sousa's picture

and so why is Gold and Silver being taken down again???

Thu, 07/31/2014 - 10:40 | 5027164 seek
seek's picture

Lately it's been to make space for an upwards spike driven by geopolitical events, so the spike price is ~$1,300.

The fact that they don't keep hitting AU when it's below about $1275 and they go nuts over $1,300 tells me what the price target is.

Anyway, I'd bet on a bounce to $1,300 within the next day or two, probably associated with news of Euro bank issues.

Thu, 07/31/2014 - 10:12 | 5027025 Bernoulli
Bernoulli's picture

Lavorgna? The "economic snapback-guy"??? http://www.businessinsider.com/deutsche-bank-gdp-snapback-coming-2014-6

How is it possible that this guy has not been fired since a long time?

Thu, 07/31/2014 - 11:49 | 5027517 corporatewhore
corporatewhore's picture

in a large corporation longevity at a position is determined by how much ass kissing one does. 

In my former life in finance, a former President with whom I worked stated that his success was because he never took a position on anything.  In other words he let the other idiot VPs, etc  take the fall.  Clever.  And yes, he was a complete dolt and a tool at the same time.

One time at a business lunch i watched this moron do nothing but primp his hair in front of a mirrored column totally ignoring the business discussion which he never could've understood if his life depended on it.  Why he primped was beyond me, his face could break a mirror.

Thu, 07/31/2014 - 10:12 | 5027026 JailBank
JailBank's picture

Who let that number out? Whoever it is they will be suicided by morning.

Thu, 07/31/2014 - 10:14 | 5027031 The Most Intere...
The Most Interesting Frog in the World's picture

4% Q2 GDP, that was surprising.  This, not so much...

Thu, 07/31/2014 - 10:17 | 5027050 madbraz
madbraz's picture

This is the problem with lying and manipulating the data to fit your algo/HFT corrupt plan - it exacerbates the problem the next time the data comes out.  This happened when they lied about Q4 2013 GDP and Q1 2014 had to be a horrible number.  The same will happen with Q3 GDP as they lied their pants about Q2 GDP...

 

Corruption at the highest levels.

Thu, 07/31/2014 - 10:17 | 5027054 Omen IV
Omen IV's picture

i would like to know which metrics are government sponsored and which are not

would like to get correlation over time of what has higher likelyhood of being manipulated

Is there anyway to give a notation on each report?

Thu, 07/31/2014 - 10:18 | 5027058 tok1
tok1's picture

this looks like a plant in that bonds/stocks selling off together on improved data / higher costs ect. so then boom a way bad number that makes no sense compared to other relevant data. nnd bonds start to stabalise / equities frim... FED always seems to do this put in an out of range good/bad number to keep it all stable.  .maybe tomorrows bad so keeps their options open..

Thu, 07/31/2014 - 10:26 | 5027101 yogibear
yogibear's picture

LOL, the 4% GDP number doesn't jive. It's BS.

More Chicago-style lying about the state of the economy.

Chicago has a history of politicians and criminal behavior.

Thu, 07/31/2014 - 10:33 | 5027128 Last of the Mid...
Last of the Middle Class's picture

Here comes your f'ing volatility! The fed can control one market but then something else goes to shit. Kind of like plugging holes in a dyke. :}

Thu, 07/31/2014 - 10:35 | 5027141 Everybodys All ...
Everybodys All American's picture

How does any of this jive with the 4% gdp number we were told of yesterday and roundly ridiculed by our "Stop the hatin" president?

Thu, 07/31/2014 - 10:45 | 5027188 Headbanger
Headbanger's picture

Shirley you jest..

Thu, 07/31/2014 - 10:47 | 5027195 seek
seek's picture

I've seen this same pattern in the micro-economic data I work with professionally. Surge that builds inventory, followed by a crash as the inventory is burned off. It makes for really good-appearing quarters during the surge, and the bad news is just sort of ignored.

It's surreal watching multiple multinational fortune 500 companies institutionalize cognitive dissonance.

Thu, 07/31/2014 - 10:53 | 5027227 Super Hans
Super Hans's picture

This seems to be the only place actually reporting anything with honesty.  

When did google news become so bad?  

Off to pawn some more shit so I can buy some food.

 

Thu, 07/31/2014 - 10:55 | 5027240 Quinvarius
Quinvarius's picture

It appears that GDP number borrowed heavily from the future.

Thu, 07/31/2014 - 11:36 | 5027459 SAT 800
SAT 800's picture

Or possibly from "Star Wars" ??

Thu, 07/31/2014 - 11:36 | 5027454 SAT 800
SAT 800's picture

"Chicago PMI drops to 13 month lows"----well, nobodies perfect.

Thu, 07/31/2014 - 13:50 | 5028136 Herdee
Herdee's picture

Chicago looks like it's catching the Detroit syndrome,must have been the bad weather.

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