Chart of the week
September’s ISM indices were all but encouraging. The manufacturing ISM fell from 49.1 to 47.8, a level last seen in 2009 and not far off the January 2016 low of 48.0. Meanwhile, the non-manufacturing ISM slid from 56.4 to 52.6, also nearing its 2016 low.
Are the manufacturing sector’s struggles starting to spill over to the rest of the economy? It is too soon to say, but the picture is strikingly similar to that of 2016. The Markit PMI indices are sitting at 2016 levels, when year-on-year GDP growth hit a low of 1.3% in the second quarter of 2016.
Unlike in 2016, other economic indicators are not yet signalling the onset of recession. While it is true that the weak ISM indices, which go beyond the manufacturing sector alone, are an invitation to monitor the situation closely, it is too early to abandon our central scenario of a non-recessionary slowdown.
The opinion expressed above is dated 4 October 2019, and liable to change.
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