Confirming what we’ve seen with the regional mfr’g surveys over the past few weeks, the national ISM at 53.5 is down from 60.4 in April and compares with a likely stale estimate of 57.1. It is now at the lowest level since Aug ’09. New Orders fell more than 10 pts to 51, the weakest since June ’09 and Backlogs also fell near 10 pts to 50.5, both now barely above the breakeven level of 50. Employment slowed to 58.2 from 62.7 and Export Orders fell 7 pts to 55. Inventories at the mfr’g level fell below 50 and were little changed for customers. Prices Paid moderated by 9 pts to a still high level of 76.5 and ISM said “mfr’s continue to experience significant cost pressures from commodities and other inputs”. Of the 18 industries surveyed, 14 reported growth. While many are saying that continued weak data just brings on QE3, its clear that QE2 has been a complete failure in helping the actual economy (it helped asset prices) more than just temporarily. To think that QE3 will actually matter to growth is evidence of what the Fed has done to market participants over the past 10+ years that every single time the US economy hiccups, the market is trained like a dog to expect the Fed to take out all the firepower. With this said, as long as Bernanke is running the Fed, QE3 and more will be likely at the expense of the US$.
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