Huge Manufacturing ISM Miss And Lowest Print Since June 2009 Sends Markets Soaring

So much for the Chicago PMI 8 Sigma renaissance. Moments ago the Manufacturing ISM came out and confirmed that all those "other" diffusion indices were correct, except for the "data" out of Chicago (yes, shocking). Printing at a contractionary 49.0, this was a drop from 50.7, well below expectations of 51.0 (and far below the cartoonish Joe Lavorgna's revised 53.0 forecast). More importantly, this was the worst ISM headline print since June 2009, the first sub-50 print since November 2012, while the New Orders of 48.8, was the worst since July 2012. Both Production and Backlogs tumbled by -4.9 and -5.0 to 48.6, and 48.0 respectively. In brief, of the 11 series tracked by the ISM, only 3 posted a reading over 50 in May. This compares to just 2 out of 11 that were below 50 in April. Oh well, so much for this recovery. But the good news for the market is that today is really bad news is really good news day, and stocks have soared as according to the vacuum tubes, the result means no taper. The farce must go on.

Visually:

And the breakdown:

From the report:

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI™ registered 49 percent, a decrease of 1.7 percentage points from April's reading of 50.7 percent, indicating contraction in manufacturing for the first time since November 2012 and only the second time since July 2009. This month's PMI™ reading is at its lowest level since June 2009, when it registered 45.8 percent. The New Orders Index decreased in May by 3.5 percentage points to 48.8 percent, and the Production Index decreased by 4.9 percentage points to 48.6 percent. The Employment Index registered 50.1 percent, a slight decrease of 0.1 percentage point compared to April's reading of 50.2 percent. The Prices Index registered 49.5 percent, decreasing 0.5 percentage point from April, indicating that overall raw materials prices decreased from last month. Several comments from the panel indicate a flattening or softening in demand due to a sluggish economy, both domestically and globally."

And the always gloomy respondents:

  • "Customers are anticipating resin price decreases and holding back orders." (Plastics & Rubber Products)
  • "Slight uptick in overall business but not substantial." (Textile Mills)
  • "Government spending has tightened, which has moved out program awards and caused some reduction in force." (Computer & Electronic Products)
  • "Market outlook is relatively flat, with some promise of raw materials inflation relaxing." (Electrical Equipment, Appliances & Components)
  • "General economy seems sluggish and pensive. Buyers are not buying much beyond lead times." (Fabricated Metal Products)
  • "Downturn in European and Chinese markets is having a negative effect on our business." (Machinery)
  • "We are having a difficult time hiring skilled employees." (Transportation Equipment)
  • "Business continues to increase, but over the past 20 days we have seen the trend flatten." (Furniture & Related Products)
  • "Market was holding strong until mid-month — then softened." (Wood Products)
  • "Decline in sales for FYQ2 over same period a year ago due to softer demand [in] both domestic and exports." (Chemical Products)

and close-up - the sub-indices are not pretty either...

New Orders 'swoon'ing again...

 

and Production at its lowest sicne May 2009...

 

and the market's "bad is good" reaction (for now)...

 

Charts: Bloomberg