Interpreting ISM's Manufacturing Sector Downturn

Yesterday's Wall Street Journal featured a story highlighting recent ISM data that points to the first manufacturing slowdown in the U.S. in years. According to the story, "The gloomy news on the factory sector came from private research group the Institute for Supply Management, which reported Wednesday that its December manufacturing index moved to a contractionary 47.7 in November, from 50.8 in November and 50.9 in October. That was the worse pace of activity since April 2003." As I look at this information, what's fascinating to me is that this contraction is not owing to excess inventories according to ISM, but "slower demand" which "appears to be more of a problem" this time around. Perhaps leaned out supply chains in the manufacturing economy are providing less of an inventory buffer for companies to run through as orders decline. Regardless, this is probably the most significant indicator of a potential 2008 recession -- at least within the manufacturing sector -- that I've seen yet.

- Jason Busch

Discuss this:

Your email address will not be published. Required fields are marked *