U.S. ISM Manufacturing Index Plummets
U.S. ISM Manufacturing Index Plummets
The ISM manufacturing index for September was much weaker than expected, dropping well below the 50-mark to 43.5, which indicates sharply declining activity in the sector. The level of this measure is usually associated with declining activity for the economy as a whole. Expectations had been for only a modest drop to 49.5.
The weakness was relatively broadly based among the key sub-components. The new orders measure tanked to 38.8 in September from 48.3 in August, while the other key measure, production, dropped to 40.8 from 52.1 in the same period. Also discouraging was the employment component, which plummeted to 41.8 from 49.7 in August. This weakening will likely weigh on expectations for Friday’s payroll employment report for September and counters the more upbeat news contained in the separate ADP report released this morning that implied a 15,000 increase in payrolls. The prices paid measure dropped to 53.5 in September from 77 and likely reflected a weakening in energy prices.
This report adds to the pessimism about the near-term outlook for the economy already threatened by the recent tightening in credit conditions. However, the near-term course of monetary policy will likely be influenced by what happens to the rescue package currently before Congress.
The initially proposed package provides sizeable funds to be made available to the government to address the illiquidity in many asset markets that are currently impaired, either directly or indirectly, by weakening sub-prime mortgages. Any moves on interest rates will await the fate of this package in Congress and an assessment of the effectiveness of the measures settled on to get financial markets functioning once again.
RBC Financial Group
http://www.rbc.com
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.
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