Industrial Recession Now Inevitable As Manufacturing ISM Worst In Six Years

Tyler Durden's picture

Following China's disappointing drop in Manufacturing PMI overnight, this morning started off poorly with Canada's PMI crashing to its lowest reading since records began at 47.5. Then US Manufacturing PMI tumbled to 51.2 - its lowest print since October 2012 (with US factory orders collapsing to weakest since 2009). But The ISM Manufacturing crashed to 48.2 (deep in contraction) - the weakest level since June 2009, with employment bumping along at its lowest level since September 2009 and imports (reflecting domestic demand perhaps) crashed to levels only seen twice in 20 years.

The manufacturing recession is now inevitable: the only question is when and how it will spread to the service sector and be recognized by the NBER:

Charts: Bloonberg


Under the surface it was ugly:


And even ISM's Holcomb can't spin this positively:


Imports have utterly collapsed...


And while New orders "rose" on a seasonally-adjusted magical basis, the uadjusted series plunged to the lowest in over two years.


What the ever gloomier respondents are saying:

  • "Low oil prices are negatively impacting oil and gas exploration activities. Low oil prices are generally positive for the petrochemical industry." (Petroleum & Coal Products)
  • "Month-over-month sales were down, profitability up." (Chemical Products)
  • "December revenue is flat compared to last month." (Computer & Electronic Products)
  • "Still very slow due to oil prices." (Fabricated Metal Products)
  • "Deflation in many commodities is helping with product savings. Sales are strong with a backlog." (Transportation Equipment)
  • "Targeting reduced inventories for raw materials by year-end." (Textile Mills)
  • "Sales have dropped and continue to be soft. This is resulting in [a] reduction in workforce and furloughs." (Apparel, Leather & Allied Products)
  • "Medical device business continues to be strong, both in the U.S. and abroad." (Miscellaneous Manufacturing)
  • "Business is going well. Low fuel prices keep full size SUV and truck sales at high volumes." (Plastics & Rubber Products)
  • "Customers are tightening their inventories for year-end, impacting our sales and shipments." (Food, Beverage & Tobacco Products)

And then there was the Markit manufacturing ISM, which also confirmed the US manfucaturing recession, when it printed at 51.2, down from 51.3 in November, and the lowest print since October 2012!

As the report noted, "U.S. manufacturers ended the year by recording the weakest improvement in overall business conditions since October 2012. This was highlighted by a fall in the final seasonally adjusted Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) to 51.2, down from 52.8 in November. Although still above the neutral 50.0 threshold, the latest reading was much weaker than the survey average (54.2) and pointed to only a marginal upturn in operating conditions."

Markit also noted that a near-stagnation in new business volumes "was the main factor weighing on the headline index in December." Measured overall, new order levels expanded only fractionally and at the weakest pace since September 2009. Anecdotal evidence cited softer underlying demand conditions, intense competition for new work and subdued business confidence among clients. Export sales were also close to stagnation in December, with manufacturers noting that the strong dollar continued to act as a drag on demand from abroad.

However, just like with Yesterday's China's Markit chief economist commentary, it was the summary by Markit's Chris Williamson that was most dire. Commenting on the final PMI data, Williamson, chief economist at Markit said:

“The manufacturing sector saw a disappointing end to 2015, and its plight looks set to continue into the New Year as headwinds show no sign of abating any time soon.


Order book growth has stalled as producers report some of the toughest trading conditions since the end of the global financial crisis.


The strong dollar is hurting exporters as well as hitting domestic sales as firms compete against inflows of cheap imports. Low oil prices are meanwhile hitting demand for goods and machinery from the energy sector. There are signs that consumers are becoming more cautious in relation to spending as interest rates lift off their historic lows, and overseas demand remains in the doldrums. All of these factors look set to continue to hurt manufacturers, and even intensify, in coming months.


“However, with the Fed stressing that the trajectory of interest rates will be data dependent, any extended period of weakness at least suggests that the rate hiking process will be very gradual.”

In retrospect, Janet Yellen could not have picked a worse time to hike rates.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
El Oregonian's picture

But. But. But. The fairy princess said we were roaring back! That the "Unemployment Rate" was almost at 5%... We were looking at green shoots! WAS IT ALL JUST ONE BIG FAT A LIE???


sarc off//

Looney's picture

PMI and ISM should be merged into PMS and all “analysts” can ‘splain the bad numbers as “that time of the month”. ;-)


Tom Servo's picture

PPT showed up at 10 am to get their hands dirty....


I expect nothing but more farce today...


tarsubil's picture

There has to be a limit on the PPT, right? Does anyone have any ideas on what it would be? They can't buy $3 trillion worth of stocks, right? 

This b*tch looks like she is about to roll over regardless of the PPT.

mtndds's picture

Ok, I will say it because the Federal Reserve loves this word.  It all TRANSITORY.  There will be a bounce at around 50 so as not to say that the US ISM is in a recession, nope cannot have that.  Remeber everyone, ITS ALL TRANSITORY.  Relax.  The Federal Reserve IS the market now.  They wont let the market drop.

kralizec's picture

Manufacturing?  Pah!  That crap be like for China and EM places, yo.  We be a service economy heah!  Is Mickey D's still open?

The Devil's picture

Manufacturing bullshit isn"t enough?

Global Hunter's picture

In Canada we are past "worst since Lehman" and now at "worst since records began".  We can still arrogantly brag that our banking system is superior to everybody else's and we are all good.

edit: I don't know how many Canadians I have met that earnestly tell me and believe that our banking system is different due to our fantastic government regulations.

Chris P's picture

See how the new leader for Canada works out. Should be Obama up north 

Free_Spirit's picture

dunno,  canada had the sense to ditch toxic Harper , so many there's some hope,  after all the damage he did is undone of course. 

Bopper09's picture

People here have been nurtured and clueless for far too long.  Out west, the attitude has always been 'but it never happens to us'.  Well, yes it can happen to us.  How many countless times I've heard from some fucking brainwashed retard 'but they do the jobs the rest of us don't want to do'. 

Government needs you to pay taxes's picture

Surely there is some massive .gov intervention involving deficit spending and incremental tyranny that can, even now, enrich the 1%ers whilst casting the illusion of paper wealth creation!!!

Silverhog's picture

Shitty news has to get in line now. Hard to choose which one to read first. 

The Ram's picture

Ah yes, reality slowly emerges.  No place to hide in 2016.  The field of dreams starts to disappear...slowly at first, then more rapidly.

Rathmullan's picture

But for today in the US markets a handful of traders are going to play tug o' war with S&P 2,000 as the center mark because big round numbers are the only valuation bechmarks they have left given the market detached from reality based on fundamentals several years ago. All central banker jabberwock.

chickadee's picture

Crude oil production is THREE PERCENT of Canadian GDP. Read it yourself:

It is only 14% of exports.

The problem in Canada is the Cassandra Central Banker Stephen Poloz continually talking the loonie lower with every negative comment he can think of. Does he realize that it's not good for investor confidence?

Lady Jessica's picture

He's herding investors into Canadian government bonds, the best performing in the G7 in 2015.

katchum's picture

That's what I said, which idiot hikes rates when the M1 money supply is shrinking.

Lady Jessica's picture

M1 ain't shrinking:

And can't until liquidity actually starts to be drained.


Glass Seagull's picture




The solution to the problem is obvious:

America needs moar seasonality, bruh!



nakki's picture

Thank God we don't manufacture anything but weapons of mass destruction or else we might be in real trouble. 17 trillion dollar economy (GDP) with a whopping 1.6 trillion coming from manufacturing. QE 4 will take care of that in the first year alone (150 billion a month).

On the plus side we still have another 35 years on the war on terror and with Hillary or Trump (or for that matter any other warmongering puppet that sits in the WH) taking care of isis, the house of Saud and Iran ratcheting it up and China and Japan about to go at it, WWIII will surely save the worlds economy.

All hail our banking overlords, its their world, everyone else is just part of the scenery.

derailedcapitalism's picture

Things north of the border have been insane (things look weak). I doubt a weakened currency will be enough to save manufacturing in Canada. With quantitative easing coming to an end, it's hard to see what will kick start the economy...

More rate hikes? I really doubt it at this point.


Car Accident Lawyer Toronto

silverer's picture

Gartman... where's Gartman?