Tag Archives: ISM manufacturing

Entire Narrative of the Election Could Change This Week … and Not Because of the Debate

There isn’t a poll out there that doesn’t have some combination of the economy, jobs and the deficit as by far the paramount issues in this election. Often these are rolled into a general theme of simply the economy and there isn’t another issue even on the radar beyond this topic. This coming week the political press will focus on the October 3 debate but a series of economic data will hit the news wires all week that likely will have an even greater chance of impacting the ballot box decisions. Any number of times we have blogged Obama’s Achilles heel which is the economy and lately the economic data is showing an economy today in the same disrepair as when he took office.   Four years into his Presidency and the country is in many places as bad or worse off than how he found it despite his trillion dollar stimulus, $5 trillion increase in the federal deficit and a sweeping overhaul in our healthcare (Obamacare) that raises costs while lowering quality.  Mitt Romney needs to perform well in the debate, but the looming avalanche of economic data this week could easily overwhelm any narrative coming from out of the debate. Business Insider runs through the week ahead in economic news:

Highlights:

  • Chinese Markets closed for Golden Week
  • Central Bank Decisions from Aussie, BOE, ECB and BOJ
  • Big Ben speaks, and the Minutes from the September meeting
  • Global PMI Data – China, EU, UK, USA
  • September Auto Sales and Retailer Same Store Sales
  • US and EU Employment reports
  • A Big Spanish Bond Auction
  • Value Investing Conference – Major HF speakers
  • European Banking Authority – final report on capital plans
  • The First debate between Gov. Romney and President Obama

Economic Calendar:

MONDAY: It’s global PMI day. So starting late Sunday night in the US, we’ll be getting critical manufacturing reports from Asia, and then Europe, and then of course the US, concluding with the US at 10:00 AM ET. Also at 10:00 AM ET we get Construction Spending for October. There’s also going to be a monetary policy speech by Bernanke, a speech by the head of the SF Fed.

TUESDAY: In the US we get September Auto & Truck Sales, which should provide a critical gauge of the state of the jobs market. The Aussie Central Bank will also act. And we get the New York ISM report.

WEDNESDAY: We get our first big preview of Friday’s non-farm payrolls report, with the ADP jobs report, coming out at 9:15 AM ET. It’s also non-manufacturing PMI day, so we’ll get numbers from China, Europe, and the US. Wednesday night of course is also the night of the first debate between Romney and Obama. Everyone will be watching.

THURSDAY: The all-important Initial Jobless Claims number comes out at 8:30 AM ET. In Europe, there will be rate decisions from the BoE and the ECB (the press conference should be most interesting), and there will be bond auctions in Spain and France. Later in the day, there will be a speech from Fed Governor Bullard.

FRIDAY: The week ends with the Grande Finale of economic data: The September Jobs Report. This needs no hyping of course. Also at 3 PM ET that day, August Consumer Credit is revealed.

Obama’s Achilles Heel

Articles regarding the bravado of the Obama campaign campaign seem more and more like whistling past they graveyard as data continues to stream in telling a very different story. I blogged about the economy as Obama’s Achilles heel before and today was another stark reminder that his economic policies have failed. Regardless of media willingness to carry water for the Obama campaign and aggressively cover any story EXCEPT the economy, the drumbeat of bad economic data grows louder and louder as we approach election day. Obama may have entered the Presidency during an economic crises, but he’s leaving the White House much like he found it:

The US manufacturing sector contracted for the third straight month in August, the longest slide since the recession ended, in line with recent data showing a pullback in business spending. The Institute for Supply Management said its manufacturing index declined to 49.6, the lowest level since July 2009. That followed readings of 49.8 in July and 49.7 in June and came in below expectations of 50. A reading below 50 indicates contraction. There have not been three straight readings below this contraction line since May-July 2009.

ISM surveys more than 300 manufacturing companies on employment, production, new orders, supplier deliveries and inventories. “The data continue to show a significant loss of momentum in manufacturing in recent months, although the overall index is still well above the low 40s levels typically associated with recession,” said Jim O’Sullivan, chief US economist at High Frequency Economics.

The new orders measure, an indicator of future demand, fell to 47.1, the lowest since April 2009, from a reading of 48 the prior month as a result of the slowdown in China. Concerns about China’s growth, combined with uncertainty in Europe and worries about the US deficit, have made corporations more cautious about investment and hiring. Slowing orders pushed the production index down to 47.2, the weakest since May 2009, from 51.3 in July.

The employment index fell to 51.6, the lowest since November 2009, from 52 the prior month. Analysts said this was particularly concerning after July’s payroll report suggested that conditions were improving. The new export orders index rose slightly to 47 from 46.5. It was down sharply from the 56.2 level averaged in the first five months of the year.

Separately, US Commerce Department data showed total construction spending declined unexpectedly by 0.9 per cent in July to $834.3bn. The data, which fell well below analysts’ estimates of a 0.4 per cent rise, followed a 0.4 per cent rise in June and a 1.6 per cent jump in May.

Obama’s Worst News in a Month

Polls come and go and the court of public opinion is both malleable and fickle.  Regardless how you view recent Supreme Court decisions, public opinion polls or state-specific issues that affect voter preference, President Obama got incredibly bad news this morning that likely overrides any perceived strength or weakness from the political news cycle over these last few weeks. Europe is already in a recession and today’s economic data is the first meaningful sign the US may be there soon:

The global economic slowdown has finally caught up with American manufacturers. The U.S. factory sector shrank in June for the first time since July 2009—the first month of the economic recovery—the Institute for Supply Management said Monday. Exports fell, and new orders, which gauge future factory activity, dropped at their fastest pace since the post-9/11 plunge in October 2001. The darkening outlook for U.S. factories comes amid new signs that the rest of the world is losing momentum, too. Manufacturing activity in the euro zone continued its months-long decline in June, with even the region’s biggest economy, Germany, contracting at its fastest pace in three years. Manufacturing also slowed in China, the world’s second-biggest economy, and South Korea’s and Taiwan’s manufacturing industries fell into contraction. The Institute for Supply Management’s index of manufacturing activity dropped to 49.7 last month from 53.5 in May. Readings below 50 indicate contracting activity. A measure of new orders fell at its fastest pace in over a decade, dropping to 47.8 from 60.1. And new export orders declined to 47.5 from 53.5.

Previously we mentioned that the biggest news last Thursday likely wasn’t the Obamacare decision, but the latest iteration of an EU rescue/bailout. Even if that plan is ultimately successful, despite more than a few skeptics, today’s manufacturing report is the greatest indicator thus far that any EU resolution may be too little too late for President Obama in November.