ISM: 49.8 — Told You So
Courtesy of Karl Denninger, The Market Ticker
I told 'ya we were going to get a sub-50 ISM from the Richmond and Philly numbers.
(Tempe, Arizona) — Economic activity in the manufacturing sector contracted in July for the second time since July 2009; however, theoverall economy grew for the 38th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.
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 49.8 percent, an increase of 0.1 percentage point from June's reading of 49.7 percent, indicating contraction in the manufacturing sector for the second consecutive month, following 34 consecutive months of expansion.
I didn't see how we could get a number over 50 given the Philly and Richmond fed district surveys, and it played out exactly as I expected.
Employment shrank to 52 from 56.6, barely positive. This does not presage a good employment report Friday. New orders remained negative at 48 and inventories are stabilizing. Prices are decreasing but slower than they were last month, and backlog is contracting faster.
That's two months out of three and continues to confirm that a "formal" recession call is likely later this year.
The market took a dip immediately and is now thinking about it….. we'll see what happens with the Fed "heroin expectation" for later today. Best guess — the market robots will think this increases the odds of "more QE" in a couple of hours and that will at least stabilize equities until 2:15.
Note that ISM Services, due out Friday, is likely to be just barely positive based on the regional surveys — particularly Richmond.
