So much for the string of near record ISM prints. Oh... and the recovery too.
As we had been warning all along looking at the unadjusted data [7](because for some reason surveys need a seasonal adjustment), US manufacturing was actually far weaker than expected. And sure enough, moments ago the ISM confirmed what we had been saying all along when it reported that the headline PMI dropped fromm 59.0 to only 56.6 which was the biggest miss since January, with the all important New Orders tumbling from 66.7 to only 60.0 and the unadjusted print matching the lowest since March, Employment sliding from 58.1 to 54.6, and Backlogs dropping back into contraction from 52.5 to 47.0. So much for the subprime autoloan driven renaissance: it appears that whoever could buy a Government Motors car with a 550 FICO, already has. And now...what?
Charted:
[8]
The breakdown:
[9]
From the report:
"The September PMI® registered 56.6 percent, a decrease of 2.4 percentage points from August’s reading of 59 percent, indicating continued expansion in manufacturing. The New Orders Index registered 60 percent, a decrease of 6.7 percentage points from the 66.7 percent reading in August, indicating growth in new orders for the 16th consecutive month. The Production Index registered 64.6 percent, 0.1 percentage point above the August reading of 64.5 percent. The Employment Index grew for the 15th consecutive month, registering 54.6 percent, a decrease of 3.5 percentage points below the August reading of 58.1 percent. Inventories of raw materials registered 51.5 percent, a decrease of 0.5 percentage point from the August reading of 52 percent, indicating growth in inventories for the second consecutive month. Comments from the panel reflect a generally positive business outlook, while noting some labor shortages and continuing concern over geopolitical unrest."
The pereptually cheery cheery-picked, goalseeked respondents are still as cheerful as ever:
- "Business seems to be picking-up as fuel prices drop. More disposable income at the C store level where many of our products are sold." (Food, Beverage & Tobacco Products)
- "Warehouse and multi-family construction seems to be continuing strong." (Fabricated Metal Products)
- "World political unrest is creating additional defense requirements." (Transportation Equipment)
- "We are seeing shipments up, year-over-year, in the 8 to10 percent range for last couple of months. This is good." (Apparel, Leather & Allied Products)
- "Seen an increase in sales due to government fiscal year-end." (Computer & Electronic Products)
- "Demand is pretty good overall. Freight continues to be a major issue." (Chemical Products)
- "Things are a bit slower than the first half." (Printing & Related Support Activities)
- "Outlook is very good. Demand seems to be growing." (Paper Products)
- "Our search continues for good machinists and electrical engineers." (Machinery)
- "Overall, orders are at the strongest point this year." (Miscellaneous Manufacturing)
... someone didn't give them the memo, the same one where we warned that Non-Seasoanlly Adjusted New Orders were leading the way all along:
[10]
And in other news, US construction spending contracted 0.8%, its 2nd biggest drop in almost 2 years, drastically missing expectations of a 0.4% gain. July's gains were revised lower to +1.2% 9from +1.8%) and private non-residential construction fell 1.4% as residential construction also contracted.
[11]
Don't worry though: the Fed has a whopping $10 billion left in its POMO goodie bag for the entire month of October (and then nothing) to make it all better.
Time to start pricing in the untaper yet?
