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It is clear the last few months have seen a big slide in this data. This is the first contraction since 2009. Notice how strong it was last fall when many other pieces of data were collapsing. Here are the new orders and backlogs charts.
New orders are in contraction for the first time since 2009. Backlogs have been shrinking most of the time for several months. This does not bode well for future production.
The employment number is still holding above the contraction level. With new orders and backlogs contracting you have to wonder how much longer that will last.
The ISM number later today will assuredly stay in contraction mode. New orders continue to fall in all major pieces of data. There are some signs of acceleration. Industrial production contracted last month. It seems very likely to contract again this month. In Industrial production I showed how SPX has a history of following IP. It may do so again.
After the Chicago number came out I heard a guy on TV say that people got scared out of stocks the last two years on soft economic data, but no recession happened. People are not going to let that happen again. I think this is really a common line of thought out there. However, this time is different. We really are in a recession. The data is showing weakness not shown in the last two years. The global economy is slowing in response to high food and energy prices. The only cure for that is for food and energy prices to go down. The FED has made that harder to happen because of QE. Money will be loath to exit commodities now. It is possible that as stocks go down, some of that money drives oil and food prices higher like it did in 2008. That would definitely crush what is left of economic growth in the world.
Bob
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