First it was Zero Hedge two hours ago, now it is the turn of JP Morgan’s Michael Ferolli.
“The employment index plunged a huge 6.4 points to 53.5, a print which adds a little downside risk to our already-below-consensus outlook for only 45,000 job growth in this Friday’s July employment report.”
As a reminder, consensus is 90,000 or thereabouts. A negative print this Friday will bring QE3 within weeks. Which, of course, is the plan to go alongside the $2.5 trillion in debt coming to the market.
“The July manufacturing ISM was a major disappointment, falling 4.4 points to 50.9. The details of the report were also discouraging, particularly the new orders index which fell below the 50 threshhold (49.2) for the first time since June, 2009.
The employment index plunged a huge 6.4 points to 53.5, a print which adds a little downside risk to our already-below-consensus outlook for only 45,000 job growth in this Friday’s July employment report. Why was this report so bad? One theory offered by, among others, an ISM spokesperson is that uncertainty over the debt ceiling is holding back business.
The direction of this effect is clearly negative, and should be first manifesting itself in the July data round, which begins today. Even so, there were other reasons to expect a softening in the ISM, including the fact that the June orders-inventories gap suggested weakening in the ISM, and the level of the regional surveys had also been below the national ISM. So even absent the debt ceiling fracas there were good reasons to look for slowing in the ISM report.
More generally, the slowing in industrial activity could be in part due to unwanted stockbuilding in the first half of the year, as final demand surprised on the downside. In that regard, one of the few bright spots in what was otherwise a miserable report was the decline in both the inventories and the customers’ inventories indices.”