So much for all the other diffusion indices, both around the world and in the US, telegraphing manufacturing contraction. Three minutes before its official release, the rumor was that the subscribers had seen a 58.7 print, on expectations of a 50.0 number, and up from 49.0 Sure enough, this is just what happened when the official number hit, leading the Chicago PMI to the highest print since March 2012: a 8 sigma beat to the consensus print and far higher than the biggest forecast.
And while last time the plunge in the PMI was bullish for stocks as it meant no Tapering, today the beat is also bullish because it means QE is working, and as a result the stock market has wiped out all earlier losses. Looking at the report, backlogs, deliveries and employment all snapped out of sub 50 contraction, while production soared from 49.9 to a ridiculous 62.7. Even employment soared from 48.7 to 56.9. Amusingly, the only thing that dipped in April was Inventories, down from 40.6 to 40.4.
And yet, the biggest irony is that sentiment, at least according to the the respondents, was once again nearly uniformly bad:
- Lately the months start good and then end bad.
- Three months of declining sales in one of our core product lines indicates a slow down, though there are a couple of others hanging in there.
- Some primary commodity resins we buy are starting to moderate and even decline a bit in price.
- Business activity should be picking up and be stronger by this time of the year, but a bit more delayed than usual, so some concern there.
- With the second corrugated linerboard increase in 6 months, the producers are showing us what an oligopoly is all about.
- Corrugated costs are going up based on supposed paper demand increases. The timing of this is a bit off based on only modest increases in market demand. I expect this increase to fail with time.
- Most other items are not increasing at this time.
- New orders have been light since March, but the sales people are still optimistic that a couple of big orders are soon to be released.