On the heels of Markit's US PMI missing expectations but rising to its highest since May 2010 (with notable inflation signals and domianted by weakness in small business) despite new export orders tumbling; ISM printed at 55.3, down from May and missing expectations. Only 50% of survey respondent s expect to increase jobs - the lowest number in 2014. New export orders also fell in ISM. Following last month's utter SNAFU [3], we are not exactly sure whether this is real yet. So far the market reaction is positive to this bad news so we do not expect a revision.
Just in case, here are Bradley Holcomb's "prepared remarks" which last month were mysteriously created without the ISM even once checking what seasonal adjustment factor it had used:
The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The June PMI® registered 55.3 percent, a decrease of 0.1 percentage point from May's reading of 55.4 percent, indicating expansion in manufacturing for the 13th consecutive month. The New Orders Index registered 58.9 percent, an increase of 2 percentage points from the 56.9 percent reading in May, indicating growth in new orders for the 13th consecutive month. The Production Index registered 60 percent, 1 percentage point below the May reading of 61 percent. Employment grew for the 12th consecutive month, registering 52.8 percent, the same level of growth as reported in May. Inventories of raw materials remained at 53 percent, the same reading as reported in both May and April. The price of raw materials grew at a slower rate in June, registering 58 percent, down 2 percentage points from May."
US PMI missed expectations but reached its highest since May 2010.
[4]
Notably, medium-sized manufacturers (100- 499 employees) saw the strongest improvement in business conditions during June, while small-sized manufacturers (1-99 employees) recorded the least marked upturn in overall operating conditions.
As Markit notes (on the tumble in new export orders)...
Export performance, however, remains a real disappointment, and trade will likely act as a drag on the economy again in the second quarter. If worries about tighter policy from the Fed start to dampen domestic demand at the same time as exporters are struggling, growth could slow again in the second half of the year
But then ISM hit.
Remember last month's total ISM SNAFU...So let's not hold our breath quite yet.
However, courtesy of last month's ISM embarrassment we now know what the New Orders seasonal adjustment factor is, and since ISM does not report unadjusted number we can back into it: at 57.5, this was the lowest unadjusted New Orders print since January!
[5]
The cherrypicked respondents are there merely to add to the propaganda value:
- "Business volume is increasing at a good pace and consumers appear to be spending more." (Food, Beverage & Tobacco Products)
- "The strength of the automotive industry continues to drive the high demand for steel." (Fabricated Metal Products)
- "Business still very solid and strong — Class 8 Truck and RV." (Transportation Equipment)
- "Seasonal business remains strong." (Primary Metals)
- "Another strong month overall." (Computer & Electronic Products)
- "Outlook is better. General uptick in our company's confidence." (Chemical Products)
- "Orders are picking up, but pricing has declined in last month. Not the norm for this time of year." (Wood Products)
- "Conditions are slightly more favorable than last year." (Printing and Related Support Activities)
- "Business is picking up once again." (Machinery)
- "Business conditions are stable to improving." (Miscellaneous Manufacturing)
Today's print (so far)
[6]
Finally, and of note, the fewest firms since 2013 expect to increase employment and new export orders fell.
