Financial Professionals




On Wednesday, August 1, 2012, the Federal Open Market Committee (FOMC) released a statement that read incredibly similar to their June 20 statement, until the final sentence.
June 20, 2012 final sentence: “The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”
August 1, 2012 final sentence: “The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”
I would interpret today’s stronger and more elaborate last sentence as follows:
•  Unless economic conditions improve significantly during the next few weeks, you can expect Chairman Bernanke to first outline at Jackson Hole on August 31 what accommodations the FOMC could unveil. Next, at its September 12-13 meeting the FOMC will implement the new easing measures.
Also, earlier in the morning, the Institute for Supply Management manufacturing index (Figure 1.1) was released. Once again it contracted in July at 49.8, slightly above June’s 49.7. Expectations for it to rise back above 50, to 50.2, were too high. Keep in mind, the June 49.7 print was a three-year low. This disappointment is concerning since the contribution from U.S. manufacturing is imperative for any potential growth rebound. There is no seasonal distortion here either, just disappointment. 
Within the report…   
•  New Orders (Figure 1.2) was 48.0, up from June’s 47.8
•  Production Index was 51.3, up from June’s 51
•  Employment Index (Figure 1.3) was 52, down from June’s 56.6 and its lowest level since December 2009
 Figure 1.1 U.S. ISM Manufacturing Index, June 2009 to August 2012

Source: Bloomberg
Figure 1.2 U.S. ISM Manufacturing Index, New Orders - January 2009 to August 2012

Source: Bloomberg
Figure 1.3 U.S. ISM Manufacturing Index, Employment Index - August 2009 to August 2012

Source: Bloomberg

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