Today’s ISM confirms our belief that the economy is not actually recovering, but simply rebounding from unsustainably low levels. The trend in economic deterioration is still clearly to the downside. As you can see below the weakness was broad based and at a reading of 40.6 the ISM manufacturing index is still clearly signaling a severe contraction in economic activity.
The trend in ISM is still clearly to the downside, but as you’ll notice in the following chart Q3 was a very dramatic drop-off so some rebound should not be surprising. What will be key is to see whether these kind of indicators can actually break that downtrend and make a sharp move to the upside breaking the long-term negative economic trends. I still have my doubts that.
Respondents’ comments were resoundingly bullish:
- “International customers are having trouble getting cash for new orders, even though they need/want the equipment.” (Computer & Electronic Products)
- “Starting to see some signs of increased production and demand from some automotive customers.” (Fabricated Metal Products)
- “Business conditions continue to be soft, but agriculture-related products are still quite bullish.” (Machinery)
- “We are optimistic that things will change for the better in 3Q.” (Chemical Products)
- “Starting to hear of slight upticks in orders from some sectors of our business but not all.” (Electrical Equipment, Appliances & Components)
All in all the report is fairly mixed. Analysts expectations were for a much lower reading, but regular readers of TPC know what I think about these “independent” analyst’s opinions….