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This morning’s ISM report is consistent with an economy that is muddling through.  This is actually good news considering the widespread belief that the USA was headed for a recession.  The US economy isn’t doing great, but it also isn’t collapsing.  This is not surprising given the balance sheet recession and the fairly large budget deficits the government is running.  Some of the pros and cons from this morning’s report:


  • Overall PMI, at 50.8, is still in expansion range.
  • New orders moved up to 52.8 after several months of contraction.
  • Employment was steady.
  • Inventories are way down which could lead to a restocking period.
  • Prices paid have plummeted to 41.  If you recall every hyperinflationist telling the world that high ISM prices paid would lead to surging CPI – well, just chalk this up as one more thing they’ve been wrong about.
  • Some of the comments are rather alarming – “Starting to see some deflation on raw materials.” (Chemical Products), “International: contraction in demand for our products is driving mitigation of excess material on order. Contract manufacturers are adjusting their resources accordingly.” (Machinery), “Business is slowing — not crashing — but uncertainty and caution is the order of the day.” (Plastics & Rubber Products), “Retail branded business is slower than expected due to consumers continuing to move to private label- and store-brand products for price advantage. Raw material supplies are in good shape, but prices are staying stubbornly higher than expected.” (Food, Beverage & Tobacco Products)
  • Exports were weak.
  • The report in general was sluggish.
This all appears to be consistent with a slowing global economy and a domestic economy that remains mired in a balance sheet recession which is depressing growth.  All in all, not great, but certainly not a disaster.

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