Friday’s September ISM manufacturing report should be intriguing.
Similar to last month, the September regional manufacturing reports from the various Fed districts, frankly, have stunk. There’s been spotty improvements, at best, in some readings, but weak reports overall.
If you recall, those lame regional gauges led to tempered expectations for August ISM manufacturing, which then inexplicably surprised on the upside. That eased double-dip concerns and helped spark the rally that’s taken stocks back to their highest levels since May.
The latest dud manufacturing report comes from the Richmond Fed, with the headline September reading actually slumping into contraction territory. This one’s awful, citizens, with everything tumbling (except future expectations) sharply. The headline -2 reading is the lowest since January, and second-lowest since April 2009. Lowlights include:
Shipments: -4 from 11 in August
Volume of orders: goose egg from 10
Capacity utilization: goose egg from 14
Average workweek: another goose egg from 14 (was 16 in July)
Wages: 8 from 13
All ugly, but Richmond Fed puts on a brave face on this stinker, with the following headline:
“Manufacturing Activity Pulled Back in September, But Expectations Upbeat”
Nice take. Feel better now?
In case you missed it, this report comes on the heels of yesterday’s business activity survey from the Dallas Fed, which fell deeper into contraction territory, at -17.7 vs -13.5 in August.
As always, comments collected from survey respondents were quite revealing. Here’s one from someone in fabricated metal product manufacturing, which pretty much sums it all up:
Uncertainties about the economy are too numerous to elaborate, but they combine to stymie meaningful improvement, at least until some semblance of order is regained. Adjusting to new realities—whatever they may become—will only occur once reality is redefined sufficiently that making medium- to long-term investment decisions is rational behavior.
Or a more simple, straightforward one, from the same industry:
Business is slowing, and price cutting is rampant. This economy is lousy.
To be fair, there were a few positive-sounding comments, but the preponderance carry a tone similar to the two above.
Here’s another, from computer and electronic product manufacturing:
We are facing increased costs from a number of fronts. We have reduced salaries and wages by 5 to 15 percent. Customers are demanding that we hold inventory for them because they are unable to forecast their own demand. The prospect of substantial tax increases and additional regulatory and insurance costs makes it impossible for us to even consider trying to expand business.
And the Fed buying more Treasuries will do what, exactly, to change what’s ailing these businesses?