July Chicago PMI was a stronger than expected 62.3 vs the consensus of 56, up from 59.1 and is a 3 month high. New Orders rose 5.5 pts to 64.6, Backlogs rose almost 7 pts to 57.6 and Employment rose 2.2 pts to 56.6. All however are below the level of April but comforting that it has shown some stabilization in light of the softness in the prior two months off the highs . Inventories rose back above 50. Prices Paid fell to the lowest since Dec. This data point follows weaker than expected regional manufacturing surveys from NY, Philly, and Dallas and a better than expected one from Richmond so we will need to see Monday’s national ISM in order to reconcile all the data and come to a good conclusion as to whether manufacturing is moderating after its big inventory influenced improvement over the past year.
The final July UoM confidence # was slightly better than expected at 67.8 vs the forecast of 67 and is up from the preliminary reading of 66.5 out a few weeks ago but still remains well below the 76 level in June. Economic conditions were down almost 10 pts from June and the Outlook is down 7.5 pts. One year inflation expectations fell to 2.7%, the lowest since March. Stocks are rallying well off their lows after both July data points coming in above expectations but also as I mentioned earlier, Q2 NOMINAL GDP was above forecasts and while it was heavy on government help and light on consumer spending, it wasn’t as alarming as the market made it out to seem initially. Of course 2011 is a different story when a lot of the government stimulus flames out and, with tax policy may reverse some.
