Pretty Weak News from the ISM on Manufacturing
The December report on manufacturing from the Institute for Supply Management came in at 47.7%, indicating contraction, which is any reading below 50%.
It was the lowest reading of 2007, and broke a 10-month expansion streak. In fact, looking at the full history of the index, it was the lowest reading since April 2003.
Beginning in June of 2003, the ISM index showed expansion for 43 straight months, and for 53 out of the next 55. Though the sector bounced back early last year after a brief bout of contraction, it may be that manufacturing’s best run in over 40 years (yes it is or was; look at the numbers; previous related posts are here and here) is officially coming to an end.
Time to panic? Hardly. Again looking at the full history, manufacturing was in contraction mode during the last seven months of 1998 and for six months in 1996. Those were both pretty good years for the overall economy, with respective GDP growth rates of 3.7% and 4.2%. Plus, manufacturing’s share of the total economy was a bit higher 10-12 years ago.
Nevertheless, there’s no escaping the fact that manufacturing’s 12% of the economy didn’t do well in December. We’ll see what’s up with the rest of the economy when the ISM’s non-manufacturing report comes out on Friday. Since today’s ISM manufacturing report starts by noting that the economy as whole grew for the 74th straight month, I expect continued expansion in non-manufacturing (November’s reading was 54.1%).
As to Old Media reaction, I expect a 5-alarm, full-blown, non-contextualized panic. I hope I’m wrong.
