Today’s ISM Manufacturing Index slipped to 49.7 from last month’s 53.5, and missing expectations for a smaller decline to 52.0.
Analysts have pointed out that this is the first time the Index has fallen below 50, which is the level that indicates whether the manufacturing sector is expanding or contracting. The print below 50 marks the first time it has fallen below this level since July of 2009. One noted difference however that makes today’s report a bit more troubling is that in July of 2009, the index was on the upswing and was up 7 months in a row and continued to trend higher for a good period after that. Today’s reading is the second month in a row of lower numbers with plenty of economic uncertainty ahead.
One of the biggest things weighing down the report was the decline in exports due to the slowdown in China and Europe.
Two months of lower readings does not necessarily make a trend. But the market will be looking for the index to regain that magic ’50’ mark as soon as possible and make sure next month’s report doesn’t make it three in a row. But at present, the headwinds in front of us will definitely make it a challenge.
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