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Tuesday, August 31, 2010


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Today's ISM number renders all of the above analysis moot and useless.


JT, on ISM, don't get prematurely exuberant. It was driven primarily by inventory & imports; whereas leading components like new orders, backlog, and deliveries all dropped. Funny how it was juxtaposed today with GM reporting a 25% drop in August sales (of course, last year August was the ill-advised cash4clunkers month). My analysis stands: you have to look under the cover of these positive lagging reports, and not look very hard, to see the negative forward trend. 

We shall know within a month: either the regional reports reverse up, or the ISM will reverse down next report. The regional reports do not stay out of alignment for long. If the regional reports stay in a decline, expect ISM on the national level to catch up by declining. 

As an aside, I am more a believer in what the China PMI report is indicating. The Chinese bottomed four months earlier than the US (Nov 08 vs Mar 09) and the Shanghai index has recently dropped but seems to have bottomed - harkening a drop in the US followed by a bottom four months hence, in the Nov time frame. 



You need to be a lot more careful with your claims . . GM did not report a sales drop of 25% for the month of August. It reported a drop of 7% from July.


JT, GM did report a 25% drop, YoY. Given one day fewer this Aug, you could reduce it to 22%. A year earlier we had the distortion of Cash4Clunkers, which is why I parenthetically mentioned it. You could use THAT to lessen the bad news, but the 7% MoM drop is also troubling. It suggests the rest of auto sales may be coming in weak. If so, the likely poor unemployment report on Friday could cause a lightening up of positions over the three-day weekend and put us all into the mode of digesting more data. 

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