There was clearly a big drop in orders over the last three months. Export orders have also dropped under the 50 level for the first time since 2009. We can see there were three previous instances of export orders dropping below the 50 level. The last two times were associated with recessions. The 1998 instanced did not lead to recession. However, there was a 20% drop in SPX during that year. That was the smallest decline related to a drop below 50. We can also see that the condition seems to persist for quite some time.
Since the first instance in 1998, exports have become a bigger percentage of total GDP. The current drop could have a bigger impact on the economy this time.
I think this next table shows exactly why new orders and export orders are falling.
Of the 23 countries that had reported when this chart was made, 16 show manufacturing in contraction. There are some big economies like Germany, Japan, and France in contraction now. The U.S. data that came out after this chart was made also was in contraction. Australia is heavily tied to China as they provide a lot of raw materials and there is no sign of an economic uptick there yet.
I can't see any evidence in the global economic data that things are about to get better. Whether the market will some day reflect this reality or not is the question of the day.
Bob
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