Tag Archives: ISM

Non-Mfg ISM

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With deficit spending running at about 7% of gdp modest growth should continue, with the ‘hand off’ coming when private sector credit expansion kicks in, which could be a while.


Karim writes:

Slowing, but still firmly in expansionary mode.
15 industries expand, 2 contract, 4 unch.


What respondents are saying…

  • “The general upswing in the economy, albeit minor, has had a positive effect.” (Arts, Entertainment & Recreation)
  • “Pricing pressures continue to increase as we see the economy begin to improve. Orders are still lagging in our industry.” (Professional, Scientific & Technical Services)
  • “Slow pace, but better than last year at this time.” (Accommodation & Food Services)
  • “Funding issues and cash flow issues continue to affect public sector procurement. Almost all capital acquisitions have been suspended.” (Public Administration)
  • “We have seen a slight improvement in business activity over the past month.” (Wholesale Trade)


June May
Composite 53.8 55.4
Activity 58.1 61.1
Prices Paid 53.8 60.6
New Orders 54.4 57.1
Employment 49.7 50.4
Exports Orders 48.0 53.5
Imports 48.0 56.5
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ISM

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Yes, I think we have a nice L shaped economy with modest GDP growth and modestly improving employment, so far mostly evidenced by the increased hours worked that you’ve been pointing out. Acceleration happens when/if some aspect of private sector credit growth takes off.

If euro solvency risks are indeed fading, it should be back to an ok market for stocks (which could have a large one time shift upwards to reflect the reduced euro risk), and low rates from the Fed until something changes.

Like Japan, the budget deficit may be large enough to keep it all from collapsing but not enough for the kind of growth that would trigger higher rates from the Fed.


Karim writes:

Data off recent peaks but still firmly in expansion territory:
Anecdotes mixed:

  • “Component lead times are increasing sharply.” (Computer & Electronic Products)
  • “Market had begun to change, but it is now declining again.” (Wood Products)
  • “BP oil spill will impact business conditions over the next few months.” (Fabricated Metal Products)
  • “The economy continues to be sluggish, with orders 8 percent to 10 percent below last year.” (Nonmetallic Mineral Products)
  • “Retail sales are strong for both the domestic and international markets.” (Food, Beverage & Tobacco Products)


June May
Index 56.2 59.7
Prices paid 57.0 77.5
Production 61.4 66.6
New Orders 58.5 65.7
Inventories 45.8 45.6
Employment 57.8 59.8
Exports orders 56.0 62.0
Imports 56.5 56.5
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Service Sector ISM//NFP

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Karim writes:

Similar to manufacturing, service sector ISM stabilizing at high levels; Large increase in backlogs also bodes well for future activity.

With employment index now also crossing the 50 level, adds to upside potential in NFP tomorrow; look for headline NFP up ~600k; with ex-census up ~225k.



May April
PMI 55.4 55.4
Activity 61.1 60.3
Prices Paid 60.6 64.7
New Orders 57.1 58.2
Backlogs 56.0 49.5
Employment 50.4 49.5
Export Orders 53.5 57.0
Imports 56.5 56.5

Anecdotes below seem to bode well for corporate profits: demand improving and costs controlled.

  • “Our business continues to grow. We are significantly above last year’s pace.” (Information)
  • “Business is steady right now — not the normal spring for construction, but improving.” (Construction)
  • “Outlook is still generally flat for the remainder of this year, with signs that orders and activity will be picking up.” (Professional, Scientific & Technical Services)
  • “Continuing our pattern of cautious optimism. Consumers appear to be coming out of hibernation and willing to spend. We expect that if this trend can remain solid, we’ll in turn spend additional dollars to support and drive sales activities.” (Retail Trade)
  • “Customers’ activity is improving in some parts of the country.” (Wholesale Trade)
  • “We continue to ‘staff to volume’ in order to control labor and supply costs.”(Health Care & Social Assistance)

Yes, looking like we’re modestly improving domestically with the risks mainly external including spillover weakness form China and the euro zone.

Export growth down a touch but not serious to this point.

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Non-Mfg ISM//Payrolls

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Karim writes:

All key components up; prices paid lower but still at high level.
Employment up 4pts and up 4.5pts relative to 6mth avg.

Hopefully, BLS can put a reasonable number on snowstorm impact on Friday.
Ex-snow and census workers, would look for +25-50k number.



Feb Jan
Composite 53.0 50.5
Activity 54.8 52.2
Prices paid 60.4 61.2
New Orders 55.0 54.7
Employment 48.6 44.6
Exports 47.0 46.0
Imports 48.5 47.0

WHAT RESPONDENTS ARE SAYING …

  • “Conditions for our business have substantially improved over the last three months.” (Information)
  • “We are proceeding with caution based upon the current market conditions.” (Public Administration)
  • “Business activity about the same as last month. Perhaps a slight increase in new orders for material and services — nothing major.” (Utilities)
  • “The overall unemployment and the net effect of housing [instability] continue to affect our business.” (Retail Trade)
  • “Business is okay. Customers are doing a lot of price shopping.” (Agriculture, Forestry, Fishing & Hunting)
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ISM

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Karim writes:

Details mixed…orders and production down; employment and backlogs up…

Anecdotals also mixed

WHAT RESPONDENTS ARE SAYING …

  • “Depends on division, plant and market served.” (Transportation Equipment)
  • “Current economy has killed new capital sales.” (Machinery)
  • “Commodities are firming again.” (Food, Beverage & Tobacco Products)
  • “First quarter orders up compared to prior two years!” (Fabricated Metal Products)
  • “…lead times for electronic parts are pushing out to 8 to 24 weeks.” (Computer & Electronic Products)


Feb Jan
PMI 56.5 58.4
New Orders 59.5 65.9
Production 58.4 66.2
Employment 56.1 53.3
Supplier Delvs 61.1 60.1
Inventories 47.3 46.5
Prices 67.0 70.0
Backlog Ords 61.0 56.0
Exports 56.5 58.5
Imports 56.0 56.5

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ISM/PMI

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Karim writes:

Shocker is employment component of Chicago PMI
->up from 47.6 to 59.8; was at 38.1 in October.

ISM employment component has been above 50 for the past 3mths but hasn’t translated into real job gwth.

Full Chicago details:



Jan Dec
Activity 61.5 58.7
Prices paid 66.2 55.6
Production 66.6 64.2
New Orders 66.4 64.4
Order backlogs 54.3 52.0
Inventories 48.7 38.6
Employment 59.8 47.6

  • Final Michigan Survey up to 74.4 from 72.8 prelim and 72.5 in Dec
  • 5-10yr inflation expectations up to 2.9% from 2.8%


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ISM/ADP

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We’ll see if the zero rate policy keeps giving that feeling that the economy is dragging an anchor chain, and requires lower taxes for a given amount of govt. spending to sustain a lower output gap.


Karim writes:

  • ADP, claims and employment component of ISM survey consistent with payroll gwth of 0 to -50k on Friday.
  • ISM (non-mfg) moves back above 50


Dec Nov
Composite 50.1 48.7
Activity 53.7 49.6
Prices paid 58.7 57.8
New Orders 52.1 55.1
Employment 44.0 41.6

  • “Economy seems to have leveled off with expectation of an upswing in our business in Q1 2010.” (Professional, Scientific & Technical Services)
  • “There has been a slight upturn in our business activities; however, it is not entirely attributable to any one particular source.” (Public Administration)
  • “The environment seems to be improving, but we will continue to be cautious as we look forward.” (Retail Trade)
  • “The current economic conditions are continuing to have a flat or negative effect on our business.” (Wholesale Trade)
  • “No items in short supply; suppliers looking to set up agreements for 2010 with quarterly or semiannual price reviews.” (Arts, Entertainment & Recreation)


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ISM

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Agreed.

We could see positive growth for while without much improvement in final demand, supported longer term by government, exports, and investment.

Equity markets strong, better than expected earnings, with real estate to follow with a lag, and high unemployment keeping real wages/business costs down.

Real wealth continues to flow from the bottom to the top.

Risks include rising marginal tax rates next year and other possible demand drains from one time fiscal adjustments running their course. But that’s too far ahead for markets to discount.


Karim writes:

Details strong; anecdotes weak. Suggests an inventory restocking, but little to no improvement in final demand.

Consistent with Fed baseline of H2 restocking to lead to positive Q3 and Q4 growth but concern over next catalyst going into 2010.

Strength in orders vs inventories could well see headline rise above 50 next month.



July June
Index 48.9 44.8
Prices paid 55.0 50.0
Production 57.9 52.5
New Orders 55.3 49.2
Inventories 33.5 30.8
Employment 45.6 40.7
Export Orders 50.5 49.5
Imports 50.0 46.0

* “[There is concern about] overall health of strategic suppliers — continue to see new suppliers filing Chapter 7 or 11, posing significant risk to supply chain.” (Machinery)

* “We believe our inventories are now at the bottom of this cycle, driving stronger demand for raw materials.” (Paper Products)

* “While our aftermarket business has improved slightly, we are still awaiting an increase in OEM demand.” (Transportation Equipment)

* “No stimulus for manufacturing.” (Fabricated Metal Products)

* “Looking at another round of shutdowns to align supply with projected demands.” (Nonmetallic Mineral Products)


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ISM (non-Mfg)

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(email exchange)

yes,

seems second quarter earnings should be better than expected and that costs are way down which will
add to profitability even with flattish sales.

and very wide net interest margins will support bank earnings growth even with low volume and continuing losses.

this can be a very good environment for stocks.


Karim writes:

Details a bit firmer than headline.

Overall, still contracting at a slower rate.



June May
Composite 47.0 44.0
Activity 49.8 42.4
Prices paid 53.7 46.9
New Orders 48.6 44.4
Employment 43.4 39.0
Export Orders 54.5 47.0
Imports 47.0 46.0

“Business has improved and holding steady.” (Arts, Entertainment & Recreation)

“Activity level is flat. Clients are delaying capital spending decisions.” (Professional, Scientific & Technical Services)

“Economy may be stabilizing. Second half looks more positive than first half.” (Information)

“Have begun spending government stimulus funding, and expect conditions to gradually improve in the near future.” (Public Administration)

“Occupancy levels continue to increase at a slow pace.” (Accommodation & Food Services)

“Activity is still slow and little has changed since last month.” (Wholesale Trade)


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