As expected, the latest economic data point, ahead of what we now believe will be an NFP miss, the Chicago March PMI, has come and gone and it was merely the latest in a long series of misses. While the headline disappointment was modest, printing at 62.2, below expectations of 63.0 and down from 64.0, it was at the subcomponents that the pain was most acute: New Orders dropped from 69.2 to 63.3, Prices Paid soared from 65.6 to 70.1, the highest since August, any growth focusing again on inventory build up - hence hollow - from 49.6 to 57.4, the largest gain since December 2010 as the restocking continues furiously in what appears forever, but most importantly, the Employment Index which slid from 64.2 to 56.3, the biggest drop since February 2009, and virtually all job gains in 2012 have now been given up. Yet the biggest caution was not anywhere in the indices, but in one of the survey responses: "Tipping point for oil pricing and impact on raw materials and Total Cost of Operations (TCO) is fast approaching." Once the tipping point for oil comes and passes, that's the ballgame, and the only option for the Fed will be to create another Lehman-like deflationary collapse.
PMI Employment Index:
And discrete responses:
- The last few weeks our orders are up compared to previous months, hope this is a good sign for months to come.
- We have a big issue as related to available capacity in the foundries. The availability of trained machinists is still a serious issue.
- Our business isn't bad but we are not booming.
- Real estate lending remains weak. C&I lending beginning to improve but is very competitive. Small businesses remain weak.
- High oil prices are having a negative impact on most chemicals and on freight costs. Major commodities are costing more because of higher fuel prices.
- Some key suppliers are quoting shorter lead times because of their decreasing backlogs.
- New orders were very light this month but our backlog may have discouraged some of those looking for short lead times.
- Tipping point for oil pricing and impact on raw materials and Total Cost of Operations (TCO) is fast approaching.
- Aluminum lead times have jumped.
Full report link.