This survey data is not the most reliable in the world when it comes to signaling recessions. It does reasonably good at whether things are getting better or worse in the short term though. So far no improvement.
Some of the sub components are a bit troubling. Here is the new orders index.
New orders continued to get worse last month. Here is the exports index.
It was slightly less bad in Aug., but still contracting. Next up is the production index.
This is the first time since 2009 that production dropped below 50. That suggests manufacturers have caught up to the order back log and are starting to cut production. With new orders still weak, will layoffs be coming soon? Here is the employment index.
It was a little lower in Aug., but still not in contraction mode. I wonder if that will still be the case in Oct. There is one that is going up strongly, the prices paid index.
Unfortunately that is not good for manufacturers. New orders are contracting while costs are going up. One more chart of interest is the new orders minus inventories.
The only time this indicator got this low without a recession in the last 15 years was last fall. It bounced strongly going into winter. That low point was not accompanied by sub 50 ISM readings. Will it be different this time with three months below 50 already?
Clearly we do not have an uptick in activity yet. With production now joining new orders in contraction and prices going up, this could be a recipe for some layoffs. If new orders don't pick up soon, I think that is likely to happen.
Bob
No comments:
Post a Comment