In what may be a stunning development, today the market may actually respond to an adverse piece of economic news by going lower. The news, in this case was the February Chicago PMI [4]which tumbled from 56.8 to 52.4, the lowest since December and far below expectations of a 56.5 print - the biggest miss in 11 months.
This was driven by a plunge in New Orders which tumbled from 60.2 to 53.0, the most since May 2011, although virtually every other components was ugly: Production posted the weakest print since September 2009, Order backlogs had its ninth month of contraction in the last year, Inventories had their 4th contraction in the last six months, Supplier Deliveries were the longest in 15 months, and so on. Ironically, only Employment was relatively normal dropping a small 0.6 from 55.7 to 55.1.
And for those claiming there is a housing recovery, we present this excerpt from one of the respondents: "a company we buy steel from, they also pre-cut steel for new home construction, back in 2007 they shipped 110 rig packages per week, today they ship 2 rig packages per week, and for carpenters, for one employed there are 15 unemployed." Housing recovery, sure. How about unleashing the millions and millions in shadow units either entering or exiting the jammed foreclosure pipeline, where millions live mortgage free just to avoid an avalanche of selling? Let's see what recovery you have then.
The charts from today's report:
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Full respondents comments:
- Things seem to be perking up. We are finally making some investments in our MRP system and plant.
- An observation, a company we buy steel from, they also pre-cut steel for new home construction, back in 2007 they shipped 110 rig packages per week, today they ship 2 rig packages per week, and for carpenters, for one employed there are 15 unemployed
- The corrugated manufacturers have announced another price increase less than 6 months after September 2012. If they are successfull, box prices would be rising 10% this time for a total of 18% in 6 months. Now we see what un-challenged industry consolidation delivers!
- Orders are lighter this month but still flowing in.
- Our business is steady, lots of noise of large orders coming, but still waiting to see them.
- Sales and order backlog declined in February, and March order book starting very soft. We believe it's an exception and seasonality in our business, hope it's not a trend.
Of course, by the time we are done typing this, the market has processed this latest ugly piece of economic data, the third miss so far today, and has resumed its levitation.