While it is unclear today if good news is bad, bad news is good, or if economic news even matters when all that matters is how much money central planners are willing to release into the market, the just released Chicago PMI [4]did post a modest rebound after the near record May plunge. [5]Printing at 52.9, the number was modestly better than May's 52.7, and higher than expectations of 52.3. The question then is whether this is good or bad for hopes of more NEW QE?With 8 of 11 respondents clearly noting that business is slowing down as inventories are rising, those who are concerned no more easing will come this year can likely breathe a sigh of relief. And while most of the indices were more or less in line, the forward looking spread between backlogs and inventories (indicative of future business demand) is the highest it has been since December 2008. What happens when one has too much inventory that can not be sold? Ask NKE longs this morning.
PMI:
[6]
Backlogs less Inventories:
[7]
Finally, the respondents are getting quite bearish:
- Have reached a steady plateau of order intake and order shipments. Projections for growth this year are pretty much out the window.
- Business seems to be a little slower in the past 2 months.
- Definite dry patch. Hopefully, it's the Summer soft spot versus an indication of an overall downturn.
- Business is still sluggish going into June. Total opposite of last year at this time. 30% less over the same time period as last year.
- Order intake continues slower than it has been, but sales is still optimistic about future orders.
- Quoting is still busy.
- Business is slowing down to a degree.
- With oil coming back down costs have eased a bit...The reality is prices are decreasing now. The price outlook is relatively stable; the only thing we need is some business to support our favorable position.
- Our orders have slowed a bit, but they normally do this time of year, fuel prices even though they have dropped some lately is causing a lot of our commodities to go up in price that we purchase.
- Raw materials keep rising as well.
- Our inventories are beginning to increase.