One of the key metrics of a recession is if the manufacturing sector contracts for six straight months. Despite President Donald Trump promising to stimulate the manufacturing industry, even though the days of pale buckets and the blowing whistle are gone, it turns out that the nation’s manufacturing sector is weakening.
On Tuesday, the Institute for Supply Management (ISM) released its manufacturing purchasing manager’s index (PMI) for September. The bad news is that it came in at 47.8 percent, the second consecutive month of contraction. The good news? Well, uh, prices are up!
Anything below 50 percent indicates a contraction. It contracted for the first time in 35 months in August.
Moreover, the ISM reported that the new export orders index fell from 43.3 percent in August to 41 percent in September, the lowest reading since March 2009. And, the ISM employment gauge for the sector had its worst month since January 2016, primarily caused by the trade war.
And, get this: backlog, new orders, raw materials inventories, and exports and imports all declined last month.
So, will this trigger a recession? Not yet.
The Federal Reserve is likely to cut interest rates later this month, expanding the money supply. If the United States and China strike a trade agreement before the year is up, then markets will celebrate.
What a fascinating time to be alive!
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