Chicago PMI Beats Expectations At The Worst Possible Time

Tyler Durden's picture


If there was one thing the market did not nead 24 hours ahead of the FOMC in the aftermath of the better than expected Case Shiller May print (yes, 2 months ago) it was a follow up beat by the Chicago PMI, as this would only make any further forceful QE tomorrow less than likely. Sure enough, this is just what happened, as the PMI printed better than expected rising from June's 33 month low, printing at 53.7 from 52.9 in June on expectations of a modest decline to 52.5. And so in a market in which everything continues to be driven by hope and prayer that Bernanke will wake up at just the right angle, Risk is once again suddenly OFF. If there was one saving grace it is that the Seasonally adjusted Employment index plunged from 60.4 to 53.3 (60.0 to 57.0 NSA) which is the lowest print since July 2011 which in turn brings it back to May 2010. This leaves hope that the NFP print on Friday will come negative. However, that will be too late for the August FOMC meeting. Oh well, there is always hope that in September the Fed's mind will change as long as some more horrible economic data comes between now and then.

Full PMI

And the employment subindex:

As usual, the best source of information comes from the survey which presented a far less optimistic picture than the headline number:

  • Number of new orders remains erratic. This month very good previous 3 not so good. Quote activity remains high.
  • Compared to the last two years, business is down. This year, though my gut is telling me business is softening, our overall business remains at a steady pace.
  • Business is getting extremely quiet! Summer vacations? Election year? EURO crisis? I wish we knew.
  • Foreclosures continuing unabated. Residential and Commercial mortgage borrowers still under economic pressure.
  • Our orders are steady, but no large spikes, July will be a little slower which it usually is for our business, June was very good.
  • A few of the chemicals we purchase are increasing. Longer term contracting has helped to keep costs of Ethanol and Ethylene Glycol low. Recent dip in oil has helped other costs. Business is a bit soft right now.
  • Economic growth is still very slow.
  • All of our major suppliers are busy. Lead times have dropped but only slightly.
  • Weather impacting crops. Global economical issues still a threat to prices.

Full report

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Tue, 07/31/2012 - 09:59 | 2664864 Snakeeyes
Snakeeyes's picture

After the Milwaukee PMI plunging to July 2009 levels, I was less than enthused about the Chicago PMI positive print.

But at least Case Shiller home prices were up almost 1% from April to May.

Tue, 07/31/2012 - 10:11 | 2664914 Hohum
Hohum's picture


Are you excited by rising housing prices?  You shouldn't be; it's a misallocation of capital.

Tue, 07/31/2012 - 13:16 | 2665531 Emile
Emile's picture


that is the best comment on this board

thank you

Tue, 07/31/2012 - 10:01 | 2664871 Hype Alert
Hype Alert's picture

It's really simple, no New QE until after the election.

Tue, 07/31/2012 - 10:12 | 2664919 malikai
malikai's picture

How is Obama going to explain that festering smell and all the flies around the necronomy in the living room?

Tue, 07/31/2012 - 10:33 | 2664999 Hype Alert
Hype Alert's picture

To who?  His voter base?  Have you not been watching?  He's done nothing he campaigned on, sent trillions to the banksters, royally hosed health care and yet the polls show him still popular.  He can kill thousands and still get the Nobel Peace Prize.  He can send guns to the drug cartels and then talk gun control here.  He can talk about HIS drug use and still allow others to have their lives ruined because of possession.  It's the most hypocritical thing I've ever seen in my life.  He doesn't have to explain anything.

Tue, 07/31/2012 - 10:45 | 2665034 Mr Pink
Mr Pink's picture

1000 thumbs up for Hype!

Tue, 07/31/2012 - 11:42 | 2665258 malikai
malikai's picture

Sad but true.

We will get what we deserve.

Tue, 07/31/2012 - 12:21 | 2665373 FoxMulder
FoxMulder's picture

Hey, you will eat your hopium and drink your change and you will like it, Mister.

Tue, 07/31/2012 - 12:36 | 2665416 Nevermore Peabody
Nevermore Peabody's picture

You should be on TV. Well put.

Tue, 07/31/2012 - 10:03 | 2664877 lizzy36
lizzy36's picture

Chicago tends to reflect auto manufacturing.

With GM channel stuffing AND pushing sub-prime auto lending to drive sales, this number shouldn't be a suprise.

We all know how this ends.....but hey maybe this time is different (tee hee).

Tue, 07/31/2012 - 10:14 | 2664882 ebworthen
ebworthen's picture

Bullshit to prevent more bullshit?

They will ease and there will be QE3 - if only to fluff the equities casino and restore banker profits and bonuses (UBS profits down 58%, something must be done!).

Just wait, financial engineers to put together SMBS (Social Media Backed Securities) of bundled Facebook, Zynga, Yahoo, Microsoft, Apple, Starbucks, Chipotle, and Green Mountain Coffee stock.  FED will immediately start buying in $50 billion dollar chunks for ten months.

Yes, worst possible time for a PMI beat for market fluffers and circle jerk participants.

When does this Mad Hatter's Tea Party end?  I want out of this rabbit hole.

Tue, 07/31/2012 - 10:05 | 2664885 kito
kito's picture

ha ha, i cant wait to see the smashdown when qe3 doesnt materialize..........................fools............

Tue, 07/31/2012 - 10:15 | 2664938 Dr. Engali
Dr. Engali's picture

That smash down is what will usher in the new QE. Unfortunately for Ben he will have to print more to catch that falling knife.

Tue, 07/31/2012 - 10:39 | 2665017 kito
kito's picture

no chance doc..... a sharp smashdown back to 12,000 wont be the impetus to another lsap. markets will cry for a few days and move on.......everything is going smoothly for way ben is going to make waves pre-election.................

Tue, 07/31/2012 - 10:52 | 2665051 FlyoverCountryS...
FlyoverCountrySchmuck's picture


In the Government-manipulated markets we have now, BAD NEWS IS GOOD NEWS, because it could have been even worse.


Tue, 07/31/2012 - 10:05 | 2664886 l1b3rty
l1b3rty's picture

Business quiet? Must be all that good weather...

Tue, 07/31/2012 - 10:05 | 2664888 RobotTrader
RobotTrader's picture

Why would we need QE when stocks are still hanging around 13,000?

Why would we need QE when gold is trading near the lows and inflation is under control?

Why would we need QE when gum-flapping, jawboning, and pie-holing is sufficient by itself to move commodity, currency, bond, and stock markets in the required direction?

Why would we need QE when our debts can be financed infinitely with near zero cost money?

Pretty much "nirvana" conditions in the financial markets right now.

Except maybe for those pesky grains prices, which will be slammed any day now with an unexpected margin hike or something.

Tue, 07/31/2012 - 10:09 | 2664906 ebworthen
ebworthen's picture

I hate to say it but good points RobotTrader.

When Draghi only has to open his lips, and quavering Ben alludes to nebulous QE at some point of some kind, the cotton candy machine markets keep churning on hot air and spun sugar.

A very merry un-birthay to you.

Tue, 07/31/2012 - 10:15 | 2664933 malikai
malikai's picture

Margin hikes should come around harvest time for maximum effect.

Tue, 07/31/2012 - 10:40 | 2665022 Lohn Jocke
Lohn Jocke's picture

Harvrest is starting in the S. Corn belt. Basis (margin) has been crashing for weeks now. Outside investors who have no clue about grain are inflating the market, but how are we supposed to export grain when the rivers are too low for barges to pass? Ethanol plants are in the red, and cattle feeders would rather liquidate then feed their herd this expensive corn/hay.

Go long beef, taking delivery might be the only affordable way to eat red meat for the next couple of years.

Tue, 07/31/2012 - 11:04 | 2665091 Nobody For President
Nobody For President's picture

Ethanol plants are in the red?

Best fucking news I've heard all week - maybe corn prices will get high enough to close all those fuckers, even with gubermint subsidies, and we can start running fuel in our vehicles without that adulterant.

Tue, 07/31/2012 - 11:45 | 2665266 malikai
malikai's picture

Sounds like it will be a good year for CSX.

Tue, 07/31/2012 - 10:20 | 2664955 Ignatius J Reilly
Ignatius J Reilly's picture

I agree.  However, what happens to the markets without QE3?  I'm sure you agree that fundamentals are not supporting 13,000; so what is?


This is all rhetorical.  I like to hear myself type.

Tue, 07/31/2012 - 11:16 | 2665158 kito
kito's picture

this time IS different.....robo actually batting 1000 on this red arrows!!!!! first....time....ever....?????

Tue, 07/31/2012 - 11:33 | 2665229 miker
miker's picture

Good questions but miss the point of one aspect of QE.  When the Fed buys "private" debt (e.g., MBS from banks or others), that new money can be directed into financial markets.  That is clearly what happened from QE1 and 1.25 T MBS haul.  The stock market may SEEM at a comfortable level but if my thinking is right, it's headed for a big fall if they don't turn around the accelerating decline in all economies.  So they need some more cash to keep it up.

ECB will also ease to allay fears of the whole thing coming apart and get spending back up.  I still think it will be a joint process to provide cover for each other.  I still think it will be this week.  Bernanke and Geithner are not idiots.  They read the reports.....increasingly and alarmingly negative.  This Chicago PMI doesn't appreciably alter what's been before. 

One final prediction:  I believe employment numbers Friday are going to come in BAD.  I think they pushed out some claims from last numbers (they were lower) to make this read worse.  That would be on Friday.  Will provide some "cover" for the easing announcment earlier.

Of course, I could be all wet on this.  Have been known to be wrong.

Tue, 07/31/2012 - 10:06 | 2664890 Cursive
Cursive's picture

Econometrics is a FAIL.

Tue, 07/31/2012 - 10:07 | 2664900 lolmao500
lolmao500's picture

PMI lies.

Tue, 07/31/2012 - 10:12 | 2664915 Savyindallas
Savyindallas's picture

since we know the banksters are going to continue to bail themselves out so they can keep getting huge bonuses, why not make it more palatable for the average American? We can have a QE lottery -we can hold it on Dancing with the Retards - every month some good looking dancer who moved on to the next round can draw names of consumers who will get free no-interest Fed loans that they will never have to pay back  -so they can pay their bills. People would eat this up. Donald Trump could be a presnter-Or jaime Diamond can give the loan from JP Morgan (Fed guaranteed of course)  -he can present it to the lucky consumer on national TV-it would make jaimie look good, great PR fo the Banks -the ratings for dancing with the retards would explode. People would learn to love QE-it would never have to end. Complainers like ZH would finally have to shut up  - it would be political suicide to oppose QE -it would be unpatriotic.

Tue, 07/31/2012 - 10:15 | 2664932 SheepDog-One
SheepDog-One's picture

So we can't haz pre-emptive easingz?

Tue, 07/31/2012 - 10:23 | 2664966 malikai
malikai's picture

Is that like premature ejaculation?

I'm sure these guys are pretty good at that.

Bernanke's probably the best.

Tue, 07/31/2012 - 10:41 | 2665027 Lohn Jocke
Lohn Jocke's picture

Fed meeting... get your "O face" ready...

Tue, 07/31/2012 - 10:39 | 2665013 Stackers
Stackers's picture

Central bankers are reactive. Not proactive. They will wait until AFTER the crash for QE.x

Tue, 07/31/2012 - 11:06 | 2665101 Nobody For President
Nobody For President's picture

They will wait until after the election, which may or may not coincide with the crash.

Tue, 07/31/2012 - 11:01 | 2665080 q99x2
q99x2's picture

Fed spokesperson Art Cashin says Fed easing to come in September.

Tue, 07/31/2012 - 11:07 | 2665104 Shizzmoney
Shizzmoney's picture

I love how all the economic data is just automatically considered to be fabricated. 

Just like our "democracy"

Tue, 07/31/2012 - 12:33 | 2665149 haskelslocal
haskelslocal's picture

Stop asking for the subsidy QE. It was never meant to be permanant. Seeing men in suits cry for QE while pissing on pover-T is quite childish.

Pick a side.

Tue, 07/31/2012 - 11:48 | 2665272 DavidC
DavidC's picture

Hmm, today's end of month and, no doubt, pumping to keep the market up. We're into August tomorrow...


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