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U.S. ISM Manufacturing

07/02/2012

The second half of 2012 began with the 10 a.m. release of the U.S Institute for Supply Management Manufacturing Index.  Priority number one for me is the condition of the U.S. economy. Investors should not ignore the upcoming release of U.S. economic data.
 
In my upcoming Q3 commentary/playbook, “The Trend Is Your Friend,” I underscore the importance of U.S. economic data and secondarily the upcoming earnings season. Be on the lookout for the release of the Q3 playbook early next week.
 
Today’s ISM Manufacturing was reported at 49.7, the first sub-50 print since the July 2009 figure of 49.2 reported in early August that year. 
 
The market consequence of this disappointing figure will be to jeopardize the follow-through appreciation potential from last Friday’s euro summit rally. Investors will most likely await this Friday’s U.S. jobs report before making any further allocation decisions. 
 
Inside the ISM report, we find lousy internals…
 
•   The month-on-month decline from May’s 53.5 to June’s 49.7 is the largest month-on-month decline since June to July 2011
•   Production index fell to 51, its lowest level since May 2009
•   New orders index fell to 47.8, its lowest level since April 2009
•   New export orders declined from 53.5 to 47.5, the largest month-on-month drop since October 2001
•   Employment index fell to 56.6 from 56.9
•   Orders waiting to be filled dropped to 44.5 from 47
•   Inventory index declined to 44 from 46
•   Customer stockpiles rose to 48.5 from 43.5 
•   Prices paid index fell sharply to 37 from 47.5
 
U.S. ISM Manufacturing, July 2008 to July 2012

Source: Bloomberg
  
U.S. ISM Manufacturing Production Index, July 2008 to July 2012

Source: Bloomberg
 
U.S. ISM Manufacturing Prices Paid Index, March 2011 to July 2012

Source: Bloomberg

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