Yesterday, the Chicago PMI miss led us to suggest that the ISM is next. Sure enough, today this other metric that had consistently beaten the negative HF economic data in the late summer was the latest to hit an inflection point, and miss substantially, with expectations of an improvement in the September number of 51.6 to 52.0 trounced, following an index print of 50.8. And while there was no major moves in the bulk of the index components, the Prices subcomponent saw an epic collapse, tumbling from 56 to 41. What does this imply for the S&P? Nothing good. But remember: correlation is not causation, a fact the Fed loves to abuse without pause.
From the report:
Full breakdwon of components:
|MANUFACTURING AT A GLANCE
|New Orders||52.4||49.6||+2.8||Growing||From Contacting||1|
|Customers' Inventories||43.5||49.0||-5.5||Too Low||Faster||31|
|Backlog of Orders||47.5||41.5||+6.0||Contracting||Slower||5|
*Number of months moving in current direction.
Commodities Up in Price
- Aluminum Products* (3); Caustic Soda; Copper*; Steel* (14); and Titanium Dioxide (2).
Commodities Down in Price
- Alloy Metals; Aluminum (2); Aluminum Products* (2); Copper* (3); Copper Based Products; Corn; Diesel Fuel; Natural Gas (3); Nickel; Plastic Resins (3); Steel* (6); and Steel Products.
Commodities in Short Supply
- Castings (2) is the only commodity reported in short supply.
And as usual, the best grasp of what is going on comes from the survey respondents themselves who continue to be overly cautious 2 years into the post-recession economy.
- "Starting to see some deflation on raw materials." (Chemical Products)
- "Overall industry volumes remain flat vs. previous month. Uncertainty in supply chain is increasing due to lower volumes vs. historical." (Electrical Equipment, Appliances & Components)
- "International: contraction in demand for our products is driving mitigation of excess material on order. Contract manufacturers are adjusting their resources accordingly." (Machinery)
- "Business is very strong, both domestically and internationally." (Fabricated Metal Products)
- "With metal prices declining, we are seeing some short-term forecast strength. If metal pricing increases again, this strength is expected to disappear again." (Primary Metals)
- "Auto industry still strong." (Transportation Equipment)
- "Business is slowing — not crashing — but uncertainty and caution is the order of the day." (Plastics & Rubber Products)
- "Retail branded business is slower than expected due to consumers continuing to move to private label- and store-brand products for price advantage. Raw material supplies are in good shape, but prices are staying stubbornly higher than expected." (Food, Beverage & Tobacco Products)