When the monthly purchasing managers index came out Friday, Wall Street was shocked -- shocked! -- to learn that the economy isn't doing so hot. (But you weren't surprised, right? After all, I warned you last month that much of the sales gains that retailers such as Target
And indeed, after a quick and temporary bump-up in August, the PMI slumped right back down last month and now sits below the dispiriting levels we saw in July. But is the news really as bad as all that?
One word: Yes
In fact, the news is even worse than the chart above suggests. Dig into the details of Friday's PMI report, and here's what you'll find:
- Production down 3.4 percentage points from August.
- Orders for new production to be built down two points.
- And the backlog of orders already placed evaporating like mist on a hot summer's day. Five points' worth of business that should've been done, gone in a snap -- poof!
Sad to say, about the only numbers trending upward last month were: prices (inflation rears its head) and inventories. Worse still, as manufacturers continued to plump up their inventory of unsold goods, the customers who should be buying those goods were actually scaling back, as customer inventories dropped 1%.
What's it mean to investors
I don't mean to be a panic-monger, folks, but this news really couldn't have come at a worse time. In just two days, Alcoa
As for me, I think discretion is the better part of value this quarter. There are storm clouds on the horizon, and it's time to hunker down.
At least, that's my read on the PMI report. But maybe you see something different? Take the Foolish Rorschach test. Tell us about it below.
Fool contributor Rich Smith does not own shares of any company named above. Rich is not a licensed economist, but he plays one on the Web. Check out his latest stock recommendations on Motley Fool CAPS. The Motley Fool has a disclosure policy.
True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.
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