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Manufacturing ISM Misses, Third Month In Contraction Territory; Biggest Miss In Construction Spending In One Year

Tyler Durden's picture


So much for the transitory bounce in positive economic reports from August. While hopes were high that maybe, just maybe, the virtuous cycle has once again been restored and the Fed's intervention would be unneeded, the August Manufacturing ISM just printed at 49.6, down from July's 49.8, and well below expectations of 50. This was the third contraction in a row, and fourth sequential miss to expectations, and joins the global PMI which as we reported yesterday now has 80% of the world in contractionary territory. The kicker was the Prices Paid category which soared to 54.0 from 39.5, a whopping 14.5 surge, which together with the always hollow Inventories category which rose from 49.0 to 53.0, and Employment, which dipped from 52.0 to 51.6, were the only categories in the 50+ region. Everything else is now contracting.

Big miss in construction spending...

And in other news, Construction spending (remember "housing has bottomed") plunged from 0.4% to -0.9%, on expectations of an unchanged print, which was the biggest miss in a year, and the biggest drop in also a year.

The last two months have seen inventories rise their largest in 27 months!!


and Prices Paid jumped notably - beating expectations by the most in 18 months...

From the report:

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI™ registered 49.6 percent, a decrease of 0.2 percentage point from July's reading of 49.8 percent, indicating contraction in the manufacturing sector for the third consecutive month. This is also the lowest reading for the PMI™ since July 2009. The New Orders Index registered 47.1 percent, a decrease of 0.9 percentage point from July, indicating contraction in new orders for the third consecutive month. The Production Index registered 47.2 percent, a decrease of 4.1 percentage points and indicating contraction in production for the first time since May 2009. The Employment Index remained in growth territory at 51.6 percent, but registered its lowest reading since November 2009 when the Employment Index registered 51 percent. The Prices Index increased 14.5 percentage points from its July reading to 54 percent. Comments from the panel generally reflect a slowdown in orders and demand, with continuing concern over the uncertain state of global economies."




Of the 18 manufacturing industries, eight are reporting growth in August in the following order: Printing & Related Support Activities; Primary Metals; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Paper Products; Chemical Products; and Miscellaneous Manufacturing. The eight industries reporting contraction in August — listed in order — are: Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; and Machinery.

Finally, per John Lohman, the Orders less Inventory leading indicator confirms much more pain is coming:

The always informative respondents are bearish to quite bearish across the board:

  • "Internal indicators and feedback from sales channels are indicating a slowdown in demand for capital equipment." (Machinery)
  • "Business continues to be very solid, but there is now a slowing of incoming orders." (Fabricated Metal Products)
  • "Incoming orders have slowed somewhat, but indications are that there will be a stronger fourth quarter." (Plastics & Rubber Products)
  • "Business is slow right now. Companies seem to be holding onto their money." (Computer & Electronic Products)
  • "We can sense, feel and see headwinds with customer orders, especially Europe related." (Apparel, Leather & Allied Products)
  • "New orders and backlog remain flat." (Miscellaneous Manufacturing)
  • "Auto industry slowing a bit in the second half [of the year]." (Transportation Equipment)
  • "U.S. drought severely impacting raw materials prices." (Food, Beverage & Tobacco Products)
  • "Lackluster demand continues in all regions of the world, and is supporting much lower raw materials prices in the second half of 2012." (Chemical Products)

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Tue, 09/04/2012 - 10:10 | 2760055 Cassandra Syndrome
Cassandra Syndrome's picture

jISM bitchez!

Tue, 09/04/2012 - 10:13 | 2760063 GetZeeGold
GetZeeGold's picture



Missed it. By jiiiiiiiiiiist much.


Tue, 09/04/2012 - 10:14 | 2760074 JPM Hater001
JPM Hater001's picture

Here comes 13000 boys and girls.

Tue, 09/04/2012 - 10:19 | 2760098 GetZeeGold
GetZeeGold's picture



Pick a number......any number.


Tue, 09/04/2012 - 10:24 | 2760118 Cassandra Syndrome
Cassandra Syndrome's picture

By the way, WTF is manufacturing? I remember that name from some time long ago.....

Tue, 09/04/2012 - 10:33 | 2760157 GetZeeGold
GetZeeGold's picture



It's when you actually build China does.


Tue, 09/04/2012 - 11:24 | 2760443 GeezerGeek
GeezerGeek's picture

Or when you manufacture the BLS does.

Tue, 09/04/2012 - 10:38 | 2760177 vast-dom
vast-dom's picture

yeah unemployment weak housing not to worry nothing a little or a lot of QE can't solve. fucking joke.

Tue, 09/04/2012 - 10:58 | 2760295 Zero Govt
Zero Govt's picture

Quite right, QE is manufacturing now

it's so easy this economics thing, we never needed an industrial revolution, we should have just made lots of paper money in our caves like the Fed

why won't the Fed let us all have printers then?

Tue, 09/04/2012 - 10:12 | 2760059 rubearish10
rubearish10's picture

Welcome back to work and welcome back to reality! Gold Bitchez!

Tue, 09/04/2012 - 10:14 | 2760070 tallen
tallen's picture

$1700 bitches

Tue, 09/04/2012 - 10:23 | 2760114 gatorengineer
gatorengineer's picture

When Benny dont print, you dont want to be a short term holder......  Long term cool -- Short term look for $1600 before $1725.....

Tue, 09/04/2012 - 10:42 | 2760207 GlomarHabu
GlomarHabu's picture




Tue, 09/04/2012 - 11:56 | 2760604 nowhereman
nowhereman's picture

Gawd, I wish I had $1600 to spare, this living hand to mouth is killing me.

Fri, 09/07/2012 - 15:36 | 2772876 fuu
fuu's picture


Tue, 09/04/2012 - 10:13 | 2760064 Cult_of_Reason
Cult_of_Reason's picture

But, but, but CNBC LiesMan and Cramer said all is well because Bernanke will print.

Tue, 09/04/2012 - 10:18 | 2760094 Conrad Murray
Conrad Murray's picture

16 Jun 2009 - Cramer: Housing Has Officially Bottomed
10 Jan 2012 - Cramer: Housing Has Bottomed

Tue, 09/04/2012 - 10:22 | 2760110 MillionDollarBoner_
MillionDollarBoner_'s picture

Third time lucky, Jimbo ;o)

Tue, 09/04/2012 - 10:42 | 2760203 GlomarHabu
GlomarHabu's picture



Old WS saying.." Those who pick bottoms only get stinky fingers"

Tue, 09/04/2012 - 11:09 | 2760361 Meesohaawnee
Meesohaawnee's picture

fleecman still wiping the dried jizz from his face from bernake

Tue, 09/04/2012 - 10:16 | 2760066 NewWorldOrange
NewWorldOrange's picture

The hell of it is, most of the data just released will be "revised" in a week or two and will actually be even worse. SOP. But the algos are likely to BTFD, so we'll probably be green by the end of the day. Rally on!

Tue, 09/04/2012 - 10:14 | 2760067 francis_sawyer
francis_sawyer's picture

brick by brick the empire is being dismantled by paper pushing fucknuts...

Tue, 09/04/2012 - 10:19 | 2760095 LawsofPhysics
LawsofPhysics's picture

"fucknuts", please, give credit where credit is due.

Tue, 09/04/2012 - 10:14 | 2760072 Non Passaran
Non Passaran's picture

20 min From now buying will commence and we'll see a long upward sloping green line... By 2pm indexes will be positive...

I am short and hoping for the opposite...

Tue, 09/04/2012 - 10:16 | 2760081 JPM Hater001
JPM Hater001's picture

20 minutes from now smart money will have had a 19 minute head start.

Tue, 09/04/2012 - 10:24 | 2760117 pods
pods's picture

And the smarter money thinks in terms of microseconds.

But the smartest money of all is nowhere near the casino.


Tue, 09/04/2012 - 10:39 | 2760192 GlomarHabu
GlomarHabu's picture



And the moon is made of green cheese

Tue, 09/04/2012 - 11:51 | 2760581 nowhereman
nowhereman's picture

The very fact that you are playing their game speaks volumes about your IQ

Tue, 09/04/2012 - 14:39 | 2761322 Non Passaran
Non Passaran's picture

Your comment speaks even more about your IQ.


Wed, 09/05/2012 - 02:13 | 2763500 slewie the pi-rat
slewie the pi-rat's picture

now_here_man :> he didn't say he was playing this game

he may be simply writing about it

you may have more intel about his activities around what he is writing about

give us a link to a comment where he says he actually trades this for example...

even so, you may be right or right and wrong (even people who test well make mistakes, do they not?) but at least you would have scored a point in mjy book

Tue, 09/04/2012 - 10:15 | 2760077 robertocarlos
robertocarlos's picture

But housing is up 3.8% year over year.

Tue, 09/04/2012 - 10:16 | 2760080 nmewn
nmewn's picture

Stocks seem unimpressed...we need a rumor to tighten this puppy up stat!!!

Tue, 09/04/2012 - 10:17 | 2760090 JPM Hater001
JPM Hater001's picture

Rumor: Stalin and Ava Braun had a secret love child and its name is Janet Napolitano...discuss amoungst yourselves.

Tue, 09/04/2012 - 11:11 | 2760369 fuu
fuu's picture


Tue, 09/04/2012 - 10:21 | 2760107 NewWorldOrange
NewWorldOrange's picture

"we need a rumor to tighten this puppy up stat!"

No doubt Reuters and Bloomberg will come up with some headlines to feed the algos. DOW down 75 points now. I doubt it'll be down that much by 4pm. More likely to be green from an overdose of Fed Hopium.

Tue, 09/04/2012 - 10:17 | 2760084 Abraxas
Abraxas's picture

Manufacturing ISM Misses. Is this good for the new Economy, or is it bad?

Tue, 09/04/2012 - 10:17 | 2760085 dingoj
dingoj's picture

Bad figures => QE => bullish

Good figures => better economy => bullish

ECB buys bonds => Europe is saved => bullish

Spain bank run => Spain requests bailout => bullish

Gee, is there any place left for some real bad shit to happen?

Tue, 09/04/2012 - 10:18 | 2760093 Abraxas
Abraxas's picture

Thanks dingoj, as you answered my question above.

Tue, 09/04/2012 - 12:30 | 2760767 viahj
viahj's picture

exponential population growth fuled by cheap energy and a debt based monetary system leads to only one thing. 

all this is merely a desperate attempt to prolong the ride while the "insiders" steal every asset they can.  NOT ONE thing has been fixed!  there will be no attempt to FIX anything, just kick the can until "something" happens leaving the global 99.99% to fend for themselves against tyrannical governments while the 0.01% flee to their enclaves.

bullish is a short term, reality will prevail.  prepare accordingly.

Tue, 09/04/2012 - 10:17 | 2760087 rubearish10
rubearish10's picture

-.5%, ok that's enough. Deploy BOTS!

Tue, 09/04/2012 - 10:17 | 2760089 LawsofPhysics
LawsofPhysics's picture

Who knew being long commodites of real value and short paper promises and fiat could have made for such a great summer ending?

Thanks ZH.

"Unexpected" by the MSM of course.

Tue, 09/04/2012 - 10:21 | 2760104 slaughterer
slaughterer's picture

Enjoy your commodity longs while they last.  Because they are not going to last.  

Tue, 09/04/2012 - 10:18 | 2760096 Jlmadyson
Jlmadyson's picture

Recovery summer is back.

Get to work Benny boy!

Printing will cure this, right?

Tue, 09/04/2012 - 10:20 | 2760097 Dr Paul Krugman
Dr Paul Krugman's picture

As Mr Durden has written previously, we need to stimulate the flow of funds.  We should now implement a new large purchase asset program to continue onward to prosperity and growth.  Bernanke is being hampered by politics - this is a first for the Neo-Classical Fed.  It is also a shame.  Bernenake, a Dr of the science of economics, should ignore the rhetoric and follow his mandate: lower unemployment so to stimulate growth.

Tue, 09/04/2012 - 10:22 | 2760112 Everybodys All ...
Everybodys All American's picture

So many examples of your thesis working Europe.

Tue, 09/04/2012 - 10:25 | 2760130 Dr Paul Krugman
Dr Paul Krugman's picture

Europe has not implemented the right programs thusfar, nor have they spent enough money to fix their problems.  Just as the case here, they have let politics get in the way of economics.

Tue, 09/04/2012 - 10:27 | 2760132 Everybodys All ...
Everybodys All American's picture


Tue, 09/04/2012 - 10:36 | 2760173 GlomarHabu
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Folks, observe  ignorance on display. Must be EBS (Empty Brain Syndrome) or COS (Can of Shit)

Reminds me of Howard Beale in "Network" .... "they'll tell you any shit you wanna hear"

Tue, 09/04/2012 - 10:24 | 2760122 JPM Hater001
JPM Hater001's picture

"Bernenake, a Dr of the science of economics"

I have a speech for you to read called "The Pretense of Knowledge."

Tue, 09/04/2012 - 10:29 | 2760136 Dr Paul Krugman
Dr Paul Krugman's picture

von Hayek was a fringe thinker.

Tue, 09/04/2012 - 11:23 | 2760438 JPM Hater001
JPM Hater001's picture

So was Gandhi

Tue, 09/04/2012 - 10:26 | 2760128 NewWorldOrange
NewWorldOrange's picture

Tyler didn't write that!

not /sarc

Tue, 09/04/2012 - 10:31 | 2760154 Dr Paul Krugman
Dr Paul Krugman's picture

Mr Durden has mentioned many times it is the flow of funds that matters, not the stock of funds.  This is why the Central Banks should have implemented larger asset buying programs, and now need to institute new ones.

Tue, 09/04/2012 - 10:38 | 2760182 adr
adr's picture

How will that increase the profit margin at my company so we can continue to pay workers living wages? Borrowing more money doesn't count as an answer.

Tue, 09/04/2012 - 11:40 | 2760532 GetZeeGold
GetZeeGold's picture



Just take the damn money......give yourself a bonus.....then we'll liquidate.


Tue, 09/04/2012 - 10:36 | 2760171 adr
adr's picture

What are these jobs you speak of Mr. Krugman? Have you ever held an actual productive one?

I have an actual productive job designing and producing product for consumption. It is becoming harder to actually produce profit in order to pay for my job.

Bernanke's inflationist policies have made raw materials more expensive, hurting margins from the start. His policies have given people less disposable income, hurting real retail sales. So now it costs more to produce my product, and we will sell less of them. Kind of hard to keep paying workers.

For a professor of economics and a Nobel Prize winner, you really are cluless to the workings of actual business. For the record, the real economy doesn't work by a single word in an economics textbook.

Tue, 09/04/2012 - 10:20 | 2760103 TooBearish
TooBearish's picture

ya but ....but GM reporting off the scale car sales....jamming!!!

Tue, 09/04/2012 - 10:31 | 2760151 GlomarHabu
GlomarHabu's picture



That will happen when you give away cars. GM selling at under production cost and to sub prime,very sub prime buyers ..welfare Cadillacs.

Tue, 09/04/2012 - 11:03 | 2760327 Zero Govt
Zero Govt's picture

can we not just label sub-prime finance what it really is: garbage 

Tue, 09/04/2012 - 10:25 | 2760127 Cursive
Cursive's picture

The prices paid subset tells us all we need to know about the New QE and the corner Benron has painted itself into.  QE has driven price inflation of goods ina a deflationary wage period.  Financial repression and road to highly unstable society.  Less prosperity and life, more violence and death.

Tue, 09/04/2012 - 10:29 | 2760137 oldfruit1
oldfruit1's picture

tyler this is a bit sensationalist, no?

i mean you're reporting a 0.2 decrease from last time! this isnt statistically significant surely?

in addition what is the ISM .. its justa survey, who cares about a survey as its subjective and hardly hard data, i know the markets love these numbers but the truth is they are such poor indicators of whats happening on the ground.


Tue, 09/04/2012 - 10:34 | 2760165 GetZeeGold
GetZeeGold's picture



0.2 here 0.2 there....pretty soon you're talking real rumbers.


Tue, 09/04/2012 - 10:33 | 2760159 rfaze
rfaze's picture

Bad news that didn't send mr market higher, just gold.....Is the Berneke 'put' showing signs of weakness.

Tue, 09/04/2012 - 10:48 | 2760234 Winston Churchill
Winston Churchill's picture

Just reality returning for the smart money.

This slow move into hard assets while trying not to raise their price

radically, is going to stop soon.I hope and expect to see a rapid divergence between

phyz and stocks soon.

Tue, 09/04/2012 - 10:44 | 2760217 adr
adr's picture

What happens when there is more inventory produced than can ever actually be sold?

I actually know the answer and it isn't pretty. It usually ends up getting sold for anything a buyer is willing to pay, and always at a loss.

It won't matter how high the prices paid to produce new goods goes. Not when you can't sell any inventory to pay for the last bill that comes due. Bankruptcy becomes the only option.

Tue, 09/04/2012 - 11:19 | 2760418 Winston of Oceania
Winston of Oceania's picture

Unless you become a Gub'ment Motors like entity...

Tue, 09/04/2012 - 10:48 | 2760238 madcows
madcows's picture

Manufacturing sector shrinkage...

"It was in the pool!  It was in the pool!"

Tue, 09/04/2012 - 10:49 | 2760242 GlomarHabu
GlomarHabu's picture



Since the criticality of each and every data point becomes magnified the closer we get to the election, just take a look at the '08 elector voting demographis and ask yourself if you thin obama wiil be able to hold what he had.

This election is all about a totally Marxist visiion of the USA vs. the majority minority holding onto the Constitution by it's fingernails


Tue, 09/04/2012 - 10:51 | 2760245 madcows
madcows's picture

What's a "majority minority"?

Tue, 09/04/2012 - 10:57 | 2760286 GlomarHabu
GlomarHabu's picture


The USA not longer has any one ethnic "majority". But we do have many minorities, one of which is still the largest but no longer over 50% of the population.   Take a guess. 

Tue, 09/04/2012 - 10:52 | 2760256 BudFox2012
BudFox2012's picture

Your article missed on very important piece of economic news Tyler.  JP Moron just upgraded Morgan Stanley this morning.  Uh Oh, you know what that means.  Bank collapse and bailout in 3... 2... 1....

Tue, 09/04/2012 - 10:54 | 2760267 yogibear
yogibear's picture

More trashing and printing of the Euro and US dollar coming. Flow out of Euros into US dollars with Draghi's printing, then Benny Bernanke's printing/trashing.

One big printing fest by the so-called Keynesians. More and more debt.

Has Krugman looked at the college tuition lately? Well over $100,000 for a 4 year in-state undergrad.

The young people are so burdened with debt and non-dis-chargeable loans. Some have several part-time low paying jobs just to keep their heads above the water. The banksters have themselves permanent debt-slaves.

It's what happens when you outsource your manufacturing and strategic industries overseas and financialized the economy over the last 30 years. 

The US won't be able to cover it's debts and long-term obligations. The US dollar is going the way of the pound-sterling.

Tue, 09/04/2012 - 11:00 | 2760313 bnbdnb
bnbdnb's picture

The prices paid change is scary.

Tue, 09/04/2012 - 11:02 | 2760323 BudFox2012
BudFox2012's picture

Isn't it though?  Scared the shit out of me.  The rise in inventory is no peach either.

Tue, 09/04/2012 - 12:35 | 2760795 viahj
viahj's picture

bullish TP!

Tue, 09/04/2012 - 11:33 | 2760506 Arnold Ziffel
Arnold Ziffel's picture

WHO would lock into a 30 year mortgage on a depreciating wood box in this economy?


Beats me.

Tue, 09/04/2012 - 11:48 | 2760566 Snakeeyes
Tue, 09/04/2012 - 12:00 | 2760626 Shizzmoney
Shizzmoney's picture

I imagine a world where you have these corporations with warehouses stocked with inventory no person wants to buy, or once QE3 hits, can't buy because the inflation on said inventory is priced in.

Only an corporate cuckolded retard could lose to an incumbent President in this shitty economy.  And the Republicans found the biggest one in the lot.

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