US Manufacturing Sector Contracts For Second Month In A Row, Misses Expectations Of Expansion

Tyler Durden's picture

Expectations that the American manufacturing sector would expand after "briefly" contracting in June were promptly doused after the Manufacturing ISM printed at 49.8, below expectations of an expansionary print of 50.2, and essentially unchanged from last month's 49.7. Where did offsetting growth come from? The most hollow of indicators - Inventory - which keeps on being built up in expectation of a demand spike that never comes. This is also the third miss in a row for the ISM, whose most watched component, the Employment index, slid from 56.6 to 52.0 confirming that the earlier ADP number was a total noisy fluke as usual. The question: is the data as bad as possible for it to be good for stocks remains unanswered, especially with some Knight algo wreaking havoc across all stocks as of this posting.

And the summary:

Here are the always interesting respondents:

  • "Business has been up for the last seven consecutive months — strong customer orders coming in." (Machinery)
  • "Automotive demand remains strong." (Fabricated Metal Products)
  • "Resin pricing has bottomed out so customer orders have increased; it was pent-up demand." (Plastics & Rubber Products)
  • "We have noticed a marked slowing in business overall. [We] have confirmed this with other companies in our industry as well." (Wood Products)
  • "Forecasts remain high, but actual bookings remain flat." (Computer & Electronic Products)
  • "Taking a conservative approach to spending including hiring, travel and inventory. U.S. economy seems stuck — at best — with little to no growth." (Apparel, Leather & Allied Products)
  • "Business remains surprisingly strong." (Primary Metals)
  • "Continued slowdown in government military sector spending in advance of the presidential elections has seriously impacted business performance." (Transportation Equipment)
  • "Business is softening, requiring some down production days." (Furniture & Related Products)
  • "General state of business this month is flat, with increasing economic uncertainty." (Chemical Products)

Comment viewing options

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

Quick, stuff some more channels!!!!  Curse this finite world with it's finite resources.  When is that colony on Mars going to be up and running, we need some more customers ASAP!!!

Stoploss's picture

NYSE is locking up WTF..

LawsofPhysics's picture

Flash crash, follwed by flash rally in 3...2...1...

Nevermind, just realized some stocks are now frozen.  what fucking "market"?

cosmictrainwreck's picture

well, there actually was a real, bonafide flash crash - circuit breaker halt, and all - on opening: MCP. Anything to do with mfg, or just "bad luck"???

Temporalist's picture

Clearly ZH has the wrong title.  They don't even include the word "Unexpectedly" like the rest of the financial news. 


HaroldWang's picture

Algos are going insane today. This is scary, especially on Fed day. Could get nuts later.

ThunderingTurd's picture

Silver says, "No print for you!" (/soup Nazi voice)

q99x2's picture

Thank God for gun sales.

orangedrinkandchips's picture

American manufacturing......


The biggest oxymoron ever!!!

youngman's picture

But people are hiring??????? 

and now the HFT´s are going beserk.....its interesting to hear the CNBC puppets try to talk about it without telling the truth...its just a bad Algo bob piss on me BOB...its called MANIPULATION...pure and should be illegal...but hey..if the tribe says its okay...its okay...

and today´s PM movements...its just paper...the real stuff is moving to the EAST..

and that 60,000 E-munis.....just a canary.....I bet today is a trillion share day....and play.....and crash

edifice's picture

The U.S. manufactures things? News to me...

Ghordius's picture

NAM (the National Association of Manufacturers ) claims that the US is:

"...the world's largest manufacturing economy, producing 21 percent of global manufactured products. China is second at 15 percent and Japan is third at 12 percent."

"U.S. manufacturing produces $1.7 trillion of value each year, or 11.7 percent of U.S. GDP. For every $1.00 spent in manufacturing, another $1.35 is added to the economy"

"Manufacturing supports an estimated 17 million jobs in the U.S.—about one in six private sector jobs. 3 Nearly 12 million Americans (or 9 percent of the workforce) are employed directly in manufacturing"

"In 2010, the average U.S. manufacturing worker earned $77,186 annually, including pay and benefits. The average worker in all industries earned $56,436 annually"

The real problem with US manufacturing is that - particularly if you exclude the weapons industry for Uncle Sam - IT'S SMALL AND MEDIUM BUSINESSES. And this means they have to pay all the taxes (big biz won't), have the shittiest funding from the banking system (the best goes to big biz), are quite unknown by the financial industry, have to comply to all the regulations (set up by big biz) and - I should have put this first because it's one of the causes - they are totally neglected by politics (that loves big biz). In Europe it's only slightly better because we have more manufacturing and so it's less neglected.

otto skorzeny's picture

sure -when you're churning out big ticket war machine products like F-22s and MRAPS it ain't too hard to pad your #s-except its just Uncle Sam printing the $s to do it with

Ghordius's picture

yes, you have to make a difference between what is being produced for Uncle Sam and the rest (see here other comments 2668629).

edifice's picture

I should've been more specific: The U.S. manufactures things besides debt, armaments, and crappy cars? News to me...

busted by the bailout's picture

Not too surprised stocks are still up on hopium, but treasuries still down seems odd given the poor ISM; should be higher on the news.


busted by the bailout's picture

looks like trannies know something other stocks don't, down 1.3%!

banksterhater's picture

Speaking of KNIGHT ALGO, look at GOV, or HMC crash and snap-backs unfkingreal!

mrktwtch2's picture

we are going to need a sell off by get bam bam out of office..if the dow is above 12400 he will win if its below 11500 he will be out..

Haager's picture

And what's in between 11500-12400? The 3rd power?

Jlmadyson's picture

Recovery summer, green shoots, goldilocks, yada, yada, yada.

Starting to become one with the system.

Control P into my bank account Bernak.


Hype Alert's picture

It's a shame the market has turned into such a spastic tool of the FED.

SKY85hawk's picture

Has anyone looked into how ADP creates their employment number?

I assume it's based on their computerized payroll data.

That's got to be more accurate than the BLS surveys that have been so widely criticized.

Background info w/b appreciated.


adr's picture

ADP processes paychecks for many companies. They extrapolate the data to apply it to the entire job picture of the country. If ADP sees an increase in the payroll for a company they process, say 10 people. They apply that increase to all companies that make up that sector.

So if a company of 100 adds 10 employees in a month, that is a 10% increase. So we'll say that across the corporations ADP processes there was a 5% average increase in payrolls. If the entire sector, including corporations ADP doesn't process, has 100k employees, that means 5,000 jobs were added according to ADP.

The issue is that ADP doesn't process the paychecks for every company and many corporations have been changing their payroll processing from ADP to cheaper companies. If a company that doesn't use ADP fires 200 people, that won't show up in their calculation, but a company that adds 10 people will.

busted by the bailout's picture



good question.  looks like its fairly heavily adjusted, seasonally and otherwise.  plus it only uses their customer data, which would tend to be mid to large sized businesses, i suspect.  raw data might be more interesting, but not sure if that is available.

methodology is here:


Dr. Engali's picture

There is a billboard I pass every day on the way to work. It is for community college offering a degree to get a job in manufacturing. I chuckle everyday when I see it and think" after you become a debt slave for this shitty degree you can go get your self a job stocking shelves at Walmart" Manufacturing in the U.S...that's funny.

adr's picture

Actually, Walmart pays better.

Unless you work for the UAW.

Ghordius's picture

I disagree. see here 2668586 . Walmart is a retailer - this does not count as manufacturing

Dr. Engali's picture

I know that's what is so funny about it. There is no maunfacturing to speak of in the U.S.

Ghordius's picture

it only looks this way because the rest is inflated. have a look at the finance industry and tell me if their numbers are anywhere "sustainable"

Dr. Engali's picture

Excuse me, but have you been to Detroit? Gary Indiana? Chicago? Pittsburg? Visit any major "manufacturing" city ,and then come back and talk to me about the manufacturing power house that you think the U.S is. I can tell you hat you will see, hollowed out shells of a city. It's pathetic.

No the finance sector is not sustainable. We are seeing it die off now.

Ghordius's picture

I've seen Pittsburg and Chicago but only 25 years ago, last time. I agree with you, mostly. Lots of manufacturing has been shipped to Mexico and then to China, yes. A big part of the rest is devoted to the needs of Uncle Sam, yes.

But there is a small core of small and medium businesses that really, really rock. A midget that holds the paper giants on it's shoulders. Wait until the monetary war takes a new chapter and you'll see. In the "financials", there are many things that go unnoticed (see my linked comment), and they are one of them.

Dr. Engali's picture

Well I can tell you that I have visited these cities more recently and it is a shame. Shells of factories everyhwere you look, and the people all shuffle around with a vacant look in their eyes. I live in a small midwestern ex-manufacturing city and it is just a smaller version of the larger cities. The midwest is full of these small 35,000 to 50,000 people cities and they are all the same. The only "jobs" are retailers, restaurants, insurance agents, real estate, lawers, and financial services. In other words somebody trying to sell you something. It's not a sustainable model.

DosZap's picture

I disagree. see here 2668586 . Walmart is a retailer - this does not count as manufacturing

Sure it does, for the Chinese.

adr's picture


Confused regulator, "Sir, why did your company build $500 million worth of inventory when the entire market sector for your product is only $250 million?"

CEO, "Simple, we mark inventory as an asset that allows us to borrow more money. Retailers let us put as much inventory as we want in their stores on consignment. We booked that as sold for the quarter, giving us amazing revenue growth sending our stock soaring. We granted our executives stock bonuses at the beginning of the quarter and took out $500 million in loans using our inventory as collateral. We used that $500 million to finance stock buybacks a the end of the quarter at the higher share price, granting our executives massive cash bonuses for stock. When the product doesn't sell we can take back the inventory since we pledged it as collateral for the loans. The bank wants to make sure we still have the backup for our loan."

Confused regulator, "That kind of sounds like a scam."

CEO, "No, no, no. Don't be silly. That is just the way business works."

Confused regulator, "Well ok. You must be doing something right. Your stock is up 75% in six months. If you were running a scam investors would find that out."

TeresaE's picture

Oh my, so much disinformation about American manufacturing.

I make and sell nuts and bolts.  Our products end up on everything from local equipment/machinery, to sporting arenas, to chromed little nuts on Harleys.

This is what I know, if not for government money flowing through medical (including building multiple hospitals), "green" or "tech" startups, dealer stuffing Big 2 and defense, American manufacturing is all but dead.  

And we took the rest of the small biz world with us.

We are being attacked by everyone from the UAW, foreign competition, local building/code inspectors, EPA, OSHA, etc., etc.  Every month brings another regulation, rule, form and we only have two employees (in addition to us).

Non-government sponsored American manufacturing has all but disappeared. 

Side notes from my recent experience:

receivables and bad checks are increasing

grumblings from other small owners about going Galt.   A couple I know/knew already did it.

Mandatory expenses are far outpacing our ability to increase sales price.  Competion with importers continues to severely stress profit potential.

Quotes have slowed to a trickle (from 20+ a day to less than 5 - on a good day), remains to be seen if it is normal summer slowdown, (which didn't happen the past couple years) or part of a longer trend.

So, until the gubment quits building stuff, or at least quits building it here, we think things will remain steady - but shrinking.  Unless this is not a summer related (further) retrenchment.

With the ever increased costs of business there is no hope in growth.  It just can't happen as more and more resources are poured into the government and mandatory (big company) overhead.  WE are being squeezed.

Probably to death.  Fiat on.

Oh yeah, there is NO FARKING WAY that the average salary is $70 some thousand.  NO way.  The unions barely make that in the big 3 plants.  I barely know any owners currently drawing that much salary anymore.  What a crock the thieving universities pitch kids.