August’s ISM manufacturing survey last month helped spark a 250-point rally by the Dow Industrials, as investors figured that ended any concern about a double dip. Today’s Sept ISM gauge fell, as expected, and is far from the all-clear signal last month’s reading was perceived to be.
All the indexes in the September report show growth slowing (or contracting, in the case of order backlog), except inventories and prices. Calculated Risk notes with new order growth slowing and inventory piling up, “further declines in the ISM PMI are very likely.” The blog points out Norbert Ore, chair of the ISM survey committee, noted these indexes are “sending strong negative signals of weakening performance in the [manufacturing] sector.”
Inventory building is now starting to look a lot less intentional, and a sign of still-sickly demand. And comments from the ISM survey respondents weren’t exactly gushing, either.
There’s an upbeat one from the chemical products arena (“Business results [top and bottom line] continue to meet or exceed our operating plan and exceed prior year performance by double digits”), but overall tone from the others remains restrained.
In computer & electronics, a commenter said “strategic customers reducing order quantities,” while a transportation equipment respondent said “customers seem to be pulling back on orders. I suspect that they are trying to reduce their inventory for the approaching year-end.” Another in food, beverage & tobacco said business is flat and “expected to remain flat.” Commodities “continue to be the main concern heading into 2011.”
ISM non-manufacturing (services) index — arguably the more important gauge, considering the orientation of the US economy — due out Tuesday.