Manufacturing Expands in January

ISM Outlines:

WHAT RESPONDENTS ARE SAYING ...

• "Still seeing raw materials pricing moving down in general, but expect inflation later in the quarter." (Chemical Products)
• "Year starting a little slow, but customers are positive about increased business in 2012." (Machinery)
• "Once again, business continues to be strong." (Paper Products)
• "Pricing remains in check with the demand we are seeing. Supplier deliveries are on time or early." (Food, Beverage & Tobacco Products)
• "The economy seems to be slowly improving." (Fabricated Metal Products)
• "Business lost to offshore is coming back." (Computer & Electronic Products)
• "Business remains strong. Order intake is great — more than 20 percent above budget." (Primary Metals)
• "Indications are that 2012 business environment will improve over 2011." (Transportation Equipment)
• "Market conditions appear to be improving, with the outlook for 2012 better yet." (Wood Products)

Source: ISM

ISM Services Expands in December

ISM reports what respondents are saying:

• "Year-end uptick in activity." (Finance & Insurance)
• "Business is stabilizing — some good signs in the private sector for commercial construction." (Construction)
• "Some additional proposal requests, but clients continue to delay decisions on capital spending. Expect first quarter 2012 activity to be sluggish." (Professional, Scientific & Technical Services)
• "Automotive industry growth seems to be outpacing the rest of the economy." (Information)
• "Demand increasing gradually." (Wholesale Trade)
• "Business is holding steady. Outlook for December and first quarter 2012 is good." (Retail Trade)

Source: ISM

Manufacturing Data Starts 2012 On a Positive Note

ISM details what respondents are saying:

• "Slow Q4 — lots of destocking and inventory reduction going on." (Chemical Products)
• "Business seems strong, but likely due to tax advantages of purchasing capital expense items." (Machinery)
• "Our business is stable with a very good outlook for 2012." (Miscellaneous Manufacturing)
• "Food prices seem to have peaked as demand is starting to wane." (Food, Beverage & Tobacco Products)
• "All auto demand remains strong." (Fabricated Metal Products)
• "Continued conservative hiring, with tight discretionary spending controls due to slower growth expectations for 2012, driven by Euro zone sovereign debt concerns and lack of viable U.S. legislative process through the 2012 election." (Computer & Electronic Products)
• "Business beginning to slow down (seasonal), but will finish with a very strong year." (Plastics & Rubber Products)
• "Business is steady today around the world." (Transportation Equipment)
• "Market has definitely slowed in the last month, and is expected to remain so this month." (Wood Products)

Source: ISM

Manufacturing Expands in September

What respondents are saying:

• "The economy continues to be a drag on our business outlook. We are trying to deal with new and additional FDA regulations which are costing significant dollars. It is hard to recoup any of these additional costs in our pricing levels without losing significant sales volumes." (Chemical Products)
• "Market is cautious, but still steady." (Electrical Equipment, Appliances & Components)
• "Global demand for semiconductors is down and maybe not yet 'bottomed out.' Inventory reduction activities are a priority." (Computer & Electronic Products)
• "Still strong automotive demand." (Fabricated Metal Products)
• "Orders remain consistent and steady — no sign of lower demand." (Paper Products)
• "Japan supply chain issues are over, but exchange rates and raw material prices are hurting our profit." (Transportation Equipment)
• "We sense a weakening in demand, but it is not extreme at this point." (Plastics & Rubber Products)
• "Overall, business is improving with a measurable uptick in orders this month. Part of that is due to pre-holiday season orders." (Miscellaneous Manufacturing)
• "Business continues to be sluggish." (Furniture & Related Products)

Source: ISM

Manufacturing at Stall Speed... Production and New Orders Decline

What respondents are saying:

• "Earlier chemical price increases are beginning to soften." (Chemical Products)
• "Business is soft, confidence is down, and we are cutting inventory and expenses." (Machinery)
• "Exports continue to be strong — domestic weak." (Computer & Electronic Products)
• "Domestic sales are showing small improvements. International sales are showing larger improvements." (Fabricated Metal Products)
• "Demand remains constant and strong." (Paper Products)
• "Current headwinds in the national and international economic environment have increased uncertainty, and are affecting our customers' willingness to commit to high-dollar equipment purchases." (Transportation Equipment)
• "We continue to post solid numbers, but the situation seems tenuous." (Plastics & Rubber Products)
• "Automotive business (represents 52 percent of our sales portfolio) continues to be strong. Core business has pulled back slightly." (Apparel, Leather & Allied Products)
• "Sales continue to be sluggish." (Furniture & Related Products)

Source: ISM

Manufacturing Rebound Stalls in July

Peter Boockvar (via The Big Picture) details:

July ISM manufacturing index at 50.9 was well below expectations of 54.5, down from 55.3 in June and the weakest since July ’09. New Orders fell below 50 at 49.2 for the 1st time since June ’09. Backlogs fell 4 pts to 45 and importantly, employment fell 6.4 pts to 53.5, the lowest since Dec ’09. Export Orders did rise 0.5 points to 54, but off the slowest since July ’09.

Inventories at both the manufacturers and customer levels fell. Prices Paid fell 9 pts to 57, the lowest since July ’10. Of the 18 industries surveyed, just 10 saw growth. ISM summed up July with this, “despite relief in pricing, however, several comments suggest a slowdown in domestic demand in the short term, while export orders continue to remain strong.”

Bottom line, we saw softening in almost all of the regional manufacturing surveys over the past few weeks with today’s only question being to what degree. As I mentioned last week, what today and last week also proves, its the economy that is driving markets and the politics of debts and deficits are just awful noise in the background right now.

Source: ISM

Pace of U.S. Recovery Slowing

Growth in the economy appears to be slowing (not that the recovery was all that amazing to begin with).

ISM Manufacturing



ADP Payroll (the "real" figure arrives this Friday)

Source: ADP

ISM Services Growth at Fastest Pace in 5 1/2 Years

ecPulse details:

The Institute for Supply Management released today the ISM services index, where the ISM Services index rose in January to 59.4 from the prior reported estimate of 57.1 and well above the expected estimates of 57.2. The services sector expanded in January at the fastest pace since August 2005.

The business activity index rose to 64.6 from 62.9, while the prices paid index rose to 72.1 from 69.5, new orders increased to 64.9 from 61.4, while the employment index rose to 54.5 from 52.6, new export orders slightly eased to 53.5 from 56.0 and imports increased to 53.5 from 51.0.

Source: ISM

ISM Manufacturing Up for 20th Straight Month

Marketwatch details:

Conditions for the nation's manufacturers improved for the 20th straight month, the Institute for Supply Management reported Tuesday. The ISM index rose to 60.8% in January from 58.5% in December. This is the highest level of the factory index since last May. The report was much stronger than expected. The consensus forecast of estimates collected by MarketWatch was for the index to remain steady at 58.5%.

Readings above 50 indicate expansion. Below the headline, the report was also strong. The key employment index improved to 61.7% in January from 58.9% in December. New orders jumped to 67.8% in January from 62% in the prior month. Input prices soared in January. The price index jumped to 81.5 from 72.5 in the prior month.

Source: ISM

Chicago Outlook: Biggest Jump in 22 Years

Marketwatch details the spectacular report coming out of Chicago:

A barometer of manufacturing conditions in the Chicago region jumped in December to its best level in more than 22 years.

The Chicago PMI rose to 68.6 in December from 62.5 in November, marking the 15th straight month that the gauge was over the 50 level indicating economic expansion and well above the 61 reading that economists polled by MarketWatch expected for December.

To put December’s report into context, the median showing of the Chicago report between 1970 and 2009 was 55.1.

The survey of purchasing managers showed the highest production levels since October 2004, new orders at their highest levels since 2005, the best employment levels in more than five years and the highest prices paid since July 2008.

Source: ISM

Services Sector Expands... Exports Lead the Way

It will be interesting to see what a weaker dollar means to exports on a going forward basis (was this just noise or the start of something?).

What respondents are saying ...

• "General state of the business has not changed in the last three months. The market is still soft for new sales due to financing requirements." (Construction)
• "Business seems to be flat from last month." (Finance & Insurance)
• "Signs that the economy may be improving, but our sector is still flat or declining." (Professional, Scientific & Technical Services)
• "Business activity is generally stable — slightly better than last year." (Accommodation & Food Services)
• "Third quarter is looking profitable with improving confidence and expectations in the economy. Capital expenditures are being approved." (Wholesale Trade)

Source: ISM

ISM Manufacturing Growth Slows

ISM respondents report:

• "Business in July was strong, the best month since October 2008." (Fabricated Metal Products)
• "Slow economy has killed sales for new equipment orders." (Machinery)
• "Quoting activity and sales are slow, and backlog is dropping." (Computer & Electronic Products)
• "Business continues to be sluggish and has fallen slightly as the economic ills continue." (Nonmetallic Mineral Products)
• "Retailers are still unwilling to gamble on inventory." (Printing & Related Support Activities)

Source: ISM

ISM Manufacturing Shows Continued Rebound

ISM details what respondents are saying:

• "Tight supply conditions exist for electronic components." (Computer & Electronic Products)
• "No signs of the ramp-up abating anytime soon." (Machinery)
• "Volatility of steel and steel-making components is forcing us to raise prices on our shipped goods to automotive customers." (Fabricated Metal Products)
• "Aftermarket sales increased 25 percent during the past quarter." (Transportation Equipment)
• "Sales exceeded budget for the fourth consecutive month." (Food, Beverage & Tobacco Products)

Source: ISM

ISM Services Index Grows at Same Pace

Marketwatch details:

Growth in the U.S. service sector was flat in April, but activity remained at the highest rate in four years, according to the Institute for Supply Management. The ISM non-manufacturing index stayed at 55.4% in April.

Readings over 50% indicate more firms believe business is getting better instead of worse. Economists surveyed by MarketWatch were looking for the index to rise to 56%. In April, 14 of 18 industries were growing. Yet the new orders index fell to 58.2% in April from 62.3% in March. And the employment index dipped to 49.5% in April from 49.8% in March.

ISM details what respondents are saying:

• "Best production/service levels in 24 months." (Wholesale Trade)
• "Selling prices for our products continue to decline." (Mining)
• "The market and other financial indicators point to an improving economy; however, that is being overshadowed by skepticism and lack of confidence. Capital spending is being constrained by concern over the economic view in a post-stimulus era, with double-digit interest rates and mounting debt." (Educational Services)
• "Market shows slight signs of tightening." (Information)
• "Business conditions are improving." (Management of Companies & Support Services)
• "There are signs of improvement which are leading us to be optimistic; however, as prices escalate the stability of the recovery is at risk." (Retail Trade)

Source: ISM

ISM Services Jump

ISM details what respondents are saying:

• "Business conditions have returned to normal (pre-recession). Our business is up significantly since 2009. We are very positive about the upcoming year." (Information)
• "Demand for loans, credit cards, mortgages and equity lending is expected to continue to increase." (Finance & Insurance)
• "Brisk business activity continues as more projects get 'green light.'" (Utilities)
• "Observing some relaxation on several fronts regarding spending and hiring. Still very cautious, but making investments where they make sense." (Retail Trade)
• "Limited funding available for development [and] expansions." (Accommodation & Food Services)
• "The economy appears to be holding its own; however, state and local funding is projected to decrease next fiscal year." (Educational Services)

Source ISM

Services Employment Stabilizing

The headline figure that's reported regarding ADP news (per Marketwatch):

According to today's ADP National Employment Report(R), private sector employment decreased by 20,000 in February. The ADP National Employment Report, created by Automatic Data Processing, Inc. (ADP(R)), in partnership with Macroeconomic Advisers, LLC, is derived from actual payroll data and measures the change in total nonfarm private employment each month.

And the corresponding chart.



But hidden in the release is this...

Automatic Data Processing, Inc, in conjunction with Macroeconomic Advisers, LLC, has published the scheduled annual revisions to the estimates of employment shown in the ADP National Employment Report. This month's ADP Report incorporates revised historical estimates based on the 2010 benchmark revisions to establishment employment published by the Bureau of Labor Statistics on February 6, 2010.

And the revision (vs. last month's release) was as follows:



So, ADP reports almost 1.4 million less people employed than last month, BUT it is important to note that this revision was done only to match that of the BLS (thus, don't expect a similar revision in Friday's national release). This may in part explain why the ADP report has been reporting stronger employment in the services sector, while the ISM services report shows continued contraction more aligned with the BLS. This month is no exception. ISM reports (hat tip Calculated Risk):

Employment activity in the non-manufacturing sector contracted in February for the 26th consecutive month. ISM's Non-Manufacturing Employment Index for February registered 48.6 percent. This reflects an increase of 4 percentage points when compared to the seasonally adjusted 44.6 percent registered in January.

We'll see Friday how this plays out in the BLS figure, but it appears that a slight decline in the services sector is likely, though we are getting close to what appears to be the bottom.

Source: ADP / ISM

Services Sector Improves.... Slightly

ISM reported on the services sector this morning (I was traveling, thus the delay). Marketwatch with the details:

The service sectors of the U.S. economy rebounded in January, the Institute for Supply Management reported Wednesday. The ISM non-manufacturing index rose to 50.5% from 49.8% in December. Despite the improvement, the increase was below expectations. Economists were looking the index to rise to 51%. The index had been above 50 for two months in the fall but then slipped under the threshold in November and December. The closely-watched employment index rose to 44.6% in January from 43.6 in December. The employment index has been below 50 since December 2007. It hit a low of 31.1 in November 2008.

Source: ISM

Manufacturing Expands in January

ISM reports:

• "Commodity prices are moving up again." (Printing & Related Support Activities)
• "We now believe that we will not have a good upturn until the 3rd quarter of 2010." (Primary Metals)
• "Overall activity is significantly higher than we typically see this time of year." (Machinery)
• "Orders from automotive very strong." (Electrical Equipment, Appliances & Components)
• "Lead times continue to be a problem for electronic components." (Computer & Electronic Products)

Source: ISM

Manufacturing Sector Continues to Expand

The WSJ reports:

The U.S. manufacturing sector finished 2009 on a high note, helped by improving production and ordering activity, according to data released Monday by the Institute for Supply Management.

Separately, U.S. construction spending tumbled in November more than expected, pulled lower by the housing and commercial sectors as the recovering economy deals with high unemployment.

The ISM's manufacturing purchasing managers' index rose to 55.9 last month, from 53.6 in November. December's reading was above the 54.0 forecasted by economists surveyed by Dow Jones Newswires. Readings above 50 indicate expanding activity.

"The manufacturing sector grew for the fifth consecutive month in December as the PMI rose to 55.9, its highest reading since April 2006 when it registered 56," said Norbert Ore, who directs the survey for the ISM.

Source: ISM

Random Blip or Double Dip?

The ISM Non-Manufacturing Index registered a 48.7 in November, lower than the 50.6 percent registered in October, indicating contraction in the non-manufacturing sector after two straight months of expansion.

What Respondents are Saying per ISM:

• "Capital markets remain very tight; lenders are not releasing funds for development projects, limiting expansion." (Accommodation & Food Services)
• "Fourth quarter still looking grim, but potential upturn for Q1 2010." (Professional, Scientific & Technical Services)
• "No one trusts that the recovery is real. Seems everything and everyone is in a holding pattern." (Public Administration)
• "Business is still flat." (Wholesale Trade)
• "U.S. business remains better than 2007 levels, although it's been through personnel and cost reductions that we are now profitable. Business continues to be about 8 percent below 2008 levels." (Real Estate, Rental & Leasing)

Source: ISM