March 31st, 2014 10:21 am | by John Jansen |
Via Millan Mulraine of TDSecurities:
The Chicago PMI declined unexpectedly in March on weaker performance across a broad swath of indicators. During the month, the headline index dipped to 55.7 from 59.8, marking the lowest print on this indicator since August. On an ISM basis, this is equivalent to a decline from a reading of 58.5 in February to a 54.6 in March. This was a far weaker performance than the market consensus for an unchanged print, and the disappointing tone suggests that the US economy is continuing to lose momentum. However, given the unusually high volatility that this indicator tends to display, we are likely to fade this one and continue to expect tomorrow’s ISM manufacturing indicator to provide a more encouraging (and in our view) more authoritative gauge on the tone of economic activity.
The details of this report, however, were broadly weak. Beyond the sharp drop in the headline index, there were big declines in a number of key leading indicators, with new orders (down from 63.6 to 58.8), employment (down from 59.3 to 50.0) and (order backlog falling from 53.7 to 50.4). Production activity, however, eked out a modest gain, rising from 59.6 to 61.7.
Overall, this was a very disappointing report, and it points to a further weakening in US domestic growth momentum. However, we are inclined to fade the weakness, particularly given its long history of big misses and the stark departure from the wide array of other regional indicators pointing in the other direction, and continue to expect a decent showing in the ISM manufacturing report tomorrow which we expect to rise to 54.4 from 53.2 the month before.