UoM Confidence, Chicago PMI

The final UoM Sept confidence figure was a better than expected 59.4, up from 57.8 in the preliminary report. Both Current Conditions and the Economic Outlook rose from early Sept but most of the gain since Aug was seen in Current Conditions. One year inflation expectations fell to 3.3% from 3.7%, the lowest since Dec, likely helped out by lower gasoline prices which have fallen to the lowest since March, 13.5% off the high of the year in May. The markets as seen think little about this better than expected number as it didn’t with the Chicago PMI because the evidence notwithstanding is that of a slowdown in economic activity around the world. The European response to Greece in Oct will help determine how quickly clarity can be brought to that region and corporate earnings beginning with AA on Oct 11th will quantify the profit impact and outlook that got all muddied up beginning in early August.

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The Sept Chicago PMI was much better than expected at 60.4 vs the estimate of 55 and up from 56.5 in Aug. It’s the best since June as New Orders jumped to 65.3 from 56.9, the most since April. Backlogs though fell 4.2 pts to 45.5, the lowest since Oct ’09. Employment snapped back by 8.5 pts to a 4 month high. Prices Paid fell by 6.3 pts to a one month low. Inventories rose by almost 8 pts to back above 60. Bottom line, following negative reports from Philly, NY, Richmond and Dallas and a positive figure from KC, I can’t explain the bounce in Chicago and the market doesn’t seem to believe its sustainability either. I venture to say that the auto industry in the Midwest seeing normalcy after the Japanese supply issues in the Spring was likely an influence. The national ISM out on Monday will be the key focus anyway so as to reconcile the conflicting regional surveys and we’ll see if it can remain above 50 with the forecast being 50.4. The global economy is in the midst of a slowdown with the degree of weakness the only question now I believe.

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