July ISM Prints At 50.9, Huge Miss Of 54.9 Consensus

Earlier today we said: "the reverse decoupling thesis will be tested once again today after the July ISM is released with consensus looking for a 54.9 print, and Zero Hedge looking for number just a tad above 50." (LaVorgna was at 54.0) Unfortunately, we were correct: the July ISM plunged from 55.3 to 50.9, or yes, "a tad above 50", on expectations of 54.9. This is the lowest ISM in two years, and confirms that the Fed's viagra no longer does anything to help the soft spot. The market took it in stride and plunged to late Friday lows. So much for the latest US debt ceiling raise market euphoria. Every single subindex dropped, with only exports and imports posting an increase, although with Imports +2.5, this more than offsets the benefits from Exports rising by just 0.5. Also, New Orders, Backlogs, Customer Inventories are all sub 50. The biggest drops occurred in Prices and and Employment, confirming that not only are employment conditions deteriorating but price making ability continue to erode.The Wall Street kneejerk commentary is hilarious, with TD's Green calling it a 'Freakshow': "TD chief economist Eric Green says in client note he is “struggling to find any silver lining” in July ISM “as the underlying components were, with the exception of export orders, lower across the board."

Charting the index: a disaster.

And the market reaction:

Repondents are not happy:

  • "Inflation pressures have finally slowed down." (Chemical Products)
  • "With products sold internationally, the business conditions we are currently experiencing are declining from abnormally [high] record-breaking levels. Business conditions are currently flattening to more normal volumes, while trending slightly downward." (Machinery)
  • "Market conditions — Europe weak, U.S. soft, Asia strong." (Computer & Electronic Products)
  • "Demand from automotive manufacturers continues to improve." (Fabricated Metal Products)
  • "Export sales very strong, while domestic sales are sluggish." (Paper Products)
  • "The looming debt ceiling has government agencies backing away from spending. Forecasting a slowdown in demand in the short term." (Transportation Equipment)
  • "Generally seeing a slowdown, which is typical this time of year. Hopeful that this is seasonal only." (Plastics & Rubber Products)
  • "Most industrial customers seem to be sustaining their business. Export orders continue to remain strong. Price pressures persist, especially with commodity materials." (Chemical Products)

And some other observations:

Commodities Up in Price

Aluminum (11); Brass; Copper (12); Copper Based Products (9); Electric/Electronic Components; Metal Parts; Plastic Products (7); Polyethylene* (2); Rubber Products (6); Steel* (11); Steel Products (8); and Titanium Dioxide (4).

Commodities Down in Price

Corn; Diesel Fuel; Ethylene; Gasoline; HDPE; LDPE; Polyethylene*; Polypropylene; Soybean Oil; Steel* (3); and Wheat.

Commodities in Short Supply

Butadiene; and Electric/Electronic Components (7).