The Chicago Purchasing Managers’ Index (PMI) came in at 56.2 this morning. The lowest forecast had been 58. As businesses start to contract, the BLS unemployment figures will increase in May once the government’s “seasonal adjustments” are removed from their calculations. Look for Romney to capitalize on the economy for his campaign. The Democrat party used the same strategy in the Summer of 2008 and we must not forget the ramifications on the stock market and TARP.
While the Dallas Fed Manufacturing Index tends to be a little less of a headline-maker than many of its macro-data peers, today’s dismal report is worth paying attention to. The index turned negative for the first time this year, dropped to its lowest level in 7 months and missed expectations by the largest amount in 10 months. The drop from +10.8 to -3.4 is also the largest sequential drop in 11 months. Only the inventories sub-index rose (hardly a bright spot) as Production, Number of Employees, New Orders, and Capacity Utilization all plunged and theaverage workweek fell for the first time in months. The US decoupling myth continues to come apart at the seams and the likelihood of more easing (extreme or not) seems to be rising by the day – because that has worked so well in the past.
Business activity in the U.S. expanded in April at the slowest pace since November 2009, a sign that manufacturing may be cooling as business investment eases.
The Institute for Supply Management-Chicago Inc. said today its barometer decreased to 56.2 during the month, lower than the most pessimistic forecast in a Bloomberg News survey, from 62.2 in March. Readings greater than 50 signal growth. Economists projected the gauge would fall to 60, according to the median of 55 estimates in the survey.
A slowdown in demand may prompt companies in the U.S. to limit the rate of inventory accumulation, while exports to Europe and Asia may cool. At the same time, auto purchases may prevent a prolonged deterioration in the industry that spurred the recovery that began almost three years ago.
“We could see manufacturing slow a notch,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. Fewer inventories “will likely cause production to slow,” he said.
Projections of the economists in the Bloomberg survey ranged from 58 to 62.9.
Stocks extended losses after the figure, with the Standard & Poor’s 500 Index dropping 0.5 percent to 1,395.99 at 10 a.m. in New York. The yield on the benchmark 10-year Treasury note declined to 1.91 percent from 1.94 percent on April 27.
Another report showed consumer spending climbed in March after the biggest gain since August 2009, and incomes picked up, indicating the biggest part of the economy will help sustain the expansion.