Ugly Chicago PMI Best Captured By Respondent: "The Economy Really Seems To Be Hanging On A Thread"

Just like yesterday's atrocious second Q3 GDP revision needed at least 1 minutes of work (so about 60 seconds more than most algos are willing to put into it) before the true gist of the economic data ugliness could be truly captured, so the true story in today's Chicago PMI - usually a critical advance indicator to the Manufacturing ISM (except lately of course: under central planning any historical correlations make no sense) - only appeared into view following a more than cursory glance.

Sure enough, while the headline number printed above 50 for the first time since August, 50.4 to be specific, missing expectations of a 50.5 increase, yet up from 49.9, the bulk of this was driven by the most illogical driver: i.e. Prices Paid, which directly correlates with collapsing profit margins, printing at a 16 month high - inverse deflation is everywhere these days it seems, while the all critical New Orders plunging to the lowest since June 2009 or 45.3 from 50.6, and finally inventories declining from 49.6 to 47.1: which makes sense after as disclosed yesterday it was inventory accumulation in Q3 that accounted for 36% of US economic "growth." What good news there was was in Production, Backlogs and Employment: the same Employment we have been told to ignore in all other data series due to the impact of Sandy.

But perhaps the best summary of the economy are the following bolded statements from the Chicago PMI respondents:

  • The economy really seems to be hanging on a thread. I do not think that upward price movements can be sustained at a time when real growth is questionable.
  • Business sales been slowing throughout the year, and continue to slow, but now at an increasing rate, becoming very alarming.
  • We are officially swamped and doing everything we can to get our machines out this year....some will bleed into 2013, but we will make up a large portion of our yearly revenue in Q4.
  • The fiscal cliff looms over us as our biggest customers are defense contractors. Can't see how increasing taxes on job creators will solve this problem, only growth will.
  • Hospital inpatient census rates are reducing - cost reduction initiatives are manadatory.
  • Several large orders continue to 'pend' but several smaller orders have kept our backlog up. Next year still looks very promising.

Finally those who enjoy predicting overall economic strength based on the New Orders less Inventories indicator, we have some bad news: