ISM Manufacturing has risen almost without hesitation for the seven months from the January collapse to new 3-year highs [6], printing at a dramatic 59.0, its biggest beat in over a year, just shy of the recovery cycle's highs in 2011, roundly rejecting the manufacturing signals heard around the world. New orders grew for the 15th month in a row to the highest reading since 2004! Earlier, Markit's US PMI missed expectations and fell modestly from preliminary data to 57.9, but moved to its highest since April 2010. Construction spending also surged, rising 1.8% (smashing expectations) - its biggest MoM gain since May 2012.
Construction spending continues to flip flop from great to terrible to great etc.
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But the story of the day was the ISM index, which following last week's blistering Chicago PMI, just printed at 59.0, well above the 57.0 expected, and up from the 57.1 last month.
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New Orders surged to 10-year highs... beware the extrapolators off this high...
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But sadly left employment behind once again...
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The breakdown:
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A sampling of what the "unbiased" selection of ISM respondents said:
- "Business is looking good for food manufacturing. Packaging materials prices are staying in check, minimum wage is up a bit, but manageable." (Food, Beverage & Tobacco Products)
- "The commercial building business is good, our business is up." (Fabricated Metal Products)
- "Overall business conditions are flat. World issues taking a toll on business. Consumers are cutting back on spending." (Transportation Equipment)
- "Overall business is improving. Order backlog is increasing. Quotes are increasing. Much more positive outlook in our sector." (Electrical Equipment, Appliances & Components)
- "Business in the energy sector continues to remain very robust with no signs of backing off in the near future." (Computer & Electronic Products)
- "Demand in the United States is consistent and geopolitics remain a concern." (Chemical Products)
- "International markets are slower due to Euro holidays, political unrest and slowing Chinese markets. North American business off slightly." (Wood Products)
- "Business is strong. Labor is becoming a difficult issue." (Furniture & Related Products)
- "Demand is strong. Numbers are up over last year." (Machinery)
- "Strongest month in years. Business is solid...Awesome!" (Primary Metals)
From the ISM' Holcombe: "The August PMI® registered 59 percent, an increase of 1.9 percentage points from July's reading of 57.1 percent, indicating continued expansion in manufacturing. This month's PMI® reflects the highest reading since March 2011 when the index registered 59.1 percent. The New Orders Index registered 66.7 percent, an increase of 3.3 percentage points from the 63.4 percent reading in July, indicating growth in new orders for the 15th consecutive month. The Production Index registered 64.5 percent, 3.3 percentage points above the July reading of 61.2 percent. The Employment Index grew for the 14th consecutive month, registering 58.1 percent, a slight decrease of 0.1 percentage point below the July reading of 58.2 percent. Inventories of raw materials registered 52 percent, an increase of 3.5 percentage points from the July reading of 48.5 percent, indicating growth in inventories following one month of contraction. The August PMI® is led by the highest recorded New Orders Index since April 2004 when it registered 67.1 percent. At the same time, comments from the panel reflect a positive outlook mixed with caution over global geopolitical unrest."
The main reason for this dramatic beat: a surge in New Orders, which on a seasonally adjusted basis rose to 66.7 from 63.4, the highest number since April 2004. This can be explained by the whopping 38% who responded they are seeing better conditions and just 48% same, compared to 29% Better and 57% same in July. And then there is the infamous seasonal adjustment factor. In short this is how the SA and NSA New Orders look for 2014:
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Ironically, employment actually declined from 58.2 to 58.1 despite this unprecedented surge in alleged new orders, the bulk of which is certainly on the back of ExIm bank Boeing orders and subprime funded GM auto construction.
Even more ironically, stocks faded on this great news... we are sure Yellen will have some excuse for why the foot needs to remain to the floor...
