Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
A big miss in ISM Manufacturing today as we see a CONTRACTION at 49.7. As I wrote last week let us see how the market reacts to bad news. If buyers come in that would be bullish. New orders were crushed wow – from 60.1 to 47.8. Prices dropped huge as well – while ironically employment held up. Very interesting stuff. Now after the knee jerk reaction down let’s see if the “David Tepper” buyers show up – QE3 draws closer by the minute.
Full report here.
“The PMI registered 49.7 percent, a decrease of 3.8 percentage points from May’s reading of 53.5 percent, indicating contraction in the manufacturing sector for the first time since July 2009, when the PMI registered 49.2 percent. The New Orders Index dropped 12.3 percentage points in June, registering 47.8 percent and indicating contraction in new orders for the first time since April 2009, when the New Orders Index registered 46.8 percent. The Production Index registered 51 percent, and the Employment Index registered 56.6 percent. The Prices Index for raw materials decreased significantly for the second consecutive month, registering 37 percent, which is 10.5 percentage points lower than the 47.5 percent reported in May. Comments from the panel range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China.”
WHAT RESPONDENTS ARE SAYING …
- “Business is still strong, with some nagging question whether it will be sustained.” (Machinery)
- “The economy and general business seem to be getting better even though recent data say otherwise.” (Fabricated Metal Products)
- “Significant raw materials price correction underway.” (Plastics & Rubber Products)
- “Local labor market shows no signs of slowing down. Competition for technical services/skilled craft remains tight.” (Petroleum & Coal Products)
- “Overall demand signals from sales forecast are trending down in all regions.” (Computer & Electronic Products)
- “Although our shipments are up year over year and from prior month, we can feel some head winds, especially from Europe. We are watching our expenses very tightly and being cautious.” (Apparel, Leather & Allied Products)
- “Business continues to exceed forecast in all markets.” (Primary Metals)
- “Economy seems to be slowing slightly due to concerns in Europe; however, production has not changed a great deal.” (Transportation Equipment)
- “Business has started to show signs of slowing.” (Furniture & Related Products)
- “Slowing world economies, particularly China, are reducing 3Q and later orders and drastically dropping some raw material prices.” (Chemical Products)
| MANUFACTURING AT A GLANCE JUNE 2012 |
||||||
|---|---|---|---|---|---|---|
| Index | Series Index Jun |
Series Index May |
Percentage Point Change |
Direction | Rate of Change |
Trend* (Months) |
| PMI | 49.7 | 53.5 | -3.8 | Contracting | From Growing | 1 |
| New Orders | 47.8 | 60.1 | -12.3 | Contracting | From Growing | 1 |
| Production | 51.0 | 55.6 | -4.6 | Growing | Slower | 37 |
| Employment | 56.6 | 56.9 | -0.3 | Growing | Slower | 33 |
| Supplier Deliveries | 48.9 | 48.7 | +0.2 | Faster | Slower | 5 |
| Inventories | 44.0 | 46.0 | -2.0 | Contracting | Faster | 3 |
| Customers’ Inventories | 48.5 | 43.5 | +5.0 | Too Low | Slower | 7 |
| Prices | 37.0 | 47.5 | -10.5 | Decreasing | Faster | 2 |
| Backlog of Orders | 44.5 | 47.0 | -2.5 | Contracting | Faster | 3 |
| Exports | 47.5 | 53.5 | -6.0 | Contracting | From Growing | 1 |
| Imports | 53.5 | 53.5 | 0.0 | Growing | Same | 7 |
| OVERALL ECONOMY | Growing | Slower | 37 | |||
| Manufacturing Sector | Contracting | From Growing | 1 | |||
*Number of months moving in current direction.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
