This morning, the July 2016 Manufacturing ISM® Report On Business® showed a slight decline in growth from 53.2 to 52.6, a decrease of 0.6 percentage point.
Bloomberg Econoday nearly went gaga over the report.
Highlights
Employment fell slightly and delays in delivery times eased, two factors that held down the July ISM index to 52.6 vs June’s 53.2. But that’s not the important news. The important news is the new orders index which remains extremely solid, at 56.9 and pointing to future strength for employment as well perhaps as slowing for future deliveries (slowing in deliveries is an indication of strength in demand, of congestion in the supply chain).
Export orders are not as strong as domestic orders but they are respectable, at 52.5 which is safely above breakeven 50 to indicate monthly growth. The reading here echoes even stronger export results the manufacturing PMI which was released earlier this morning.
Production is solid in this report, at 55.4 for a 7 tenths gain in the month. Inventories are flat and prices for inputs are showing modest pressure.
But it’s the new orders index that is the standout in this report and which hints at badly needed improvement in government data where new orders have yet to show strength. If the ISM orders pan out, the economy looks to get a second-half lift from its lagging sector, the factory sector.
Recent History
The ISM manufacturing index is expected to hold steady at a moderate but constructive 53.2 in July, unchanged from June which was the best reading since February last year. New orders were an outstanding highlight of the June report, at 57.0 and pointing to strength in production and employment for ISM’s July report.
Same Old Second Half Recovery Song(From Bloomberg)
“If the ISM orders pan out, the economy looks to get a second-half lift from its lagging sector, the factory sector.”
- Last Month: “New orders were an outstanding highlight of the June report, at 57.0 and pointing to strength in production and employment for ISM’s July report.”
- This Month: “The important news is the new orders index which remains extremely solid, at 56.9 and pointing to future strength for employment.”
- Actual Result: Employment contracted (as opposed to rising at a slower rate).
Same Old Song
ISM Manufacturing Numbers
| July Manufacturing ISM | ||||||
|---|---|---|---|---|---|---|
| Index | Jul | June | PP Change | Direction | Rate of Change | Trend in Months |
| PMI® | 52.6 | 53.2 | -0.6 | Growing | Slower | 5 |
| New Orders | 56.9 | 57.0 | -0.1 | Growing | Slower | 7 |
| Production | 55.4 | 54.7 | 0.7 | growing | Faster | 7 |
| Employment | 49.4 | 50.4 | -1.0 | Contracting | From Growing | 1 |
| Supplier Deliveries | 51.8 | 55.4 | -3.6 | Slowing | Slower | 3 |
| Inventories | 49.5 | 48.5 | 1.0 | Contracting | Slower | 13 |
| Customers’ Inventories | 51.0 | 51.0 | 0.0 | Too High | Same | 2 |
| Prices | 55.0 | 60.5 | -5.5 | Increasing | Slower | 5 |
| Backlog of Orders | 48.0 | 52.5 | -4.5 | Contracting | From Growing | 1 |
| New Export Orders | 52.5 | 53.5 | -1.0 | Growing | Slower | 5 |
| Imports | 52.0 | 52.0 | 0.0 | Growing | Same | 2 |
What Happened?
New orders have been increasing for 7 months. But employment actually contracted.
Why? The first clue is the backlog of work contracted.
This is likely an indication that although new orders are rising, they are rising at a very weak rate. Also note that that the rate of increase in prices just took a plunge as did supplier deliveries.
Finally, recall the ISM is a diffusion index. A small rise at one company will offset a deeper decline at another (or vice versa).
At best, Bloomberg is reading far too much into some very conflicting numbers.
Mike “Mish” Shedlock
And this song too: Same Old Wine. https://www.youtube.com/watch?v=xrYHFn2tT48 The musicians have seen the same thing so often there are a couple generations of songs about the phenomenon.
Stepping back a few years.
… then, getting back to the subject matter of ISM:
When your selling, everything is looking UP!
And they have Hillary to think about.
If they don’t ramp the numbers and their associated hype to the max, Hillary might look upon them as not completely supportive…if you know what I mean.
Our only short term survival alternative is Hillary. There is virtually NO government employee that will support Trump…in this election, but more importantly, in his administration (if he was so lucky as to win). Neither republican or democrat will lift a finger to do anything advancing Trump’s agendas, even if they are in agreement.
This is what we face. The choice is a hard one as we will need to be willing to sacrifice everything in order to preserve our constitutional republic. I doubt that will happen. We haven’t even been willing to restrain ourselves from buying imports and hiring illegals that would actually preserve our own jobs.
Let’s save ourselves from further anxiety and just give up. Stop paying attention to what is happening around us every day. It has become a morbid obsession, this vigil for the impending doom.
It is a cancer that has overtaken our body after years of warnings. If we didn’t care enough back when it could have made a difference, why should we care now that there is not a damned thing we can do about it?
The whole economy is just been going sideways for like 18 months or so. I can’t remember everything ever being this bland… of course, I’ve never been through a period of low/no/lessthanno interest rates before. Come to think of it, niether has may father (1914-2009), or my grandfather (1869-1939), or my great great grandfather for that matter(1789-1872).
“…The whole economy is just been going sideways for like 18 months or so…”
Huh?
The stock market has been going sideways for 18 months.
The actual economy has been going sideways since at least 2005, arguably more like 1994-5. Everything since then was just a bunch of incompetent spoiled brats partying with their children’s credit card.
The last 18 months was when the actual creditors told the bank their credit card department had put the entire bank in jeopardy.
There is no level of QE / ZIRP (or negative stupidity) that will get the economy going again. There is a level of debt that will end this economic super-power just as it did many other super-powers before it.
Mish won’t like this anymore than those empty skullheads at the FOMC, but QE is over and ZIRP is going to end. Not because the crooks in Washington want it to, but because the policy everyone knew would never work has now become a threat to the regime itself.
Who cares what ISM said. Its an opinion poll, no more accurate than the political polls that said Bremain and Ted Cruz and Hilary were unstoppable.
“DEWEY BEATS TRUMAN!!!” said all the media outlets
My greatest wish is for the meltdown of all meltdowns to happen within the next 10 years so that the Baby Boomers have to eat some of our own cooking.
It’d be grossly unfair for the millennials to take the brunt of the hit. I believe we Boomers will go down in American history as the most selfish and arrogant and conceited and wasteful generation ever.
We ended up being the chink in the nation’s armor.
Too much prosperity.
Prosperity will destroy a person (or a civilization) faster than any other malady known to man.