Wednesday, 6 February 2008

ISM Non-maufacturing Cliff Diving

The new NMI (Non-Manufacturing Index) at 44.6 percent indicates contraction within the non-manufacturing sector for January 2008. Non-manufacturing business activity contracted for the first time since March 2003," Nieves said. He added, "The New Orders Index contracted to 43.5 percent, the lowest since October 2001. The Employment Index contracted to 43.9 percent, the lowest since February 2002. The Prices Index decreased to 70.7 percent in January, indicating a slight slowing in price increases for January. According to the new NMI, only three non-manufacturing industries reported growth in January. Members' comments in January indicate that weakness in the economy coupled with increased costs have negatively affected their business. Members have also indicated that they are experiencing inflationary pressures. The overall indication in January is that non-manufacturing has come to the end of a long-term period of growth and has contracted for the month of January."

New Orders Index 43.5%

Business Activity Index 41.9%

Employment Index 43.9%

All these indices are screaming recession and since the non-maufacturing sector makes up more than 80% of the US economy it is pretty damning evidence. Some interesting comments from some of the repsondents;


"Recession fears taking hold as cost containment strategies have been dusted off from 2002." (Finance & Insurance)

"Business [is] slow as normal after holiday rush." (Management of Companies & Support Services)

"Oil increases affecting delivery costs and the costs of goods." (Retail Trade)

"Business is tough coming into Q1 after a very tough, unprofitable Q4. Competitive pricing is driving rates to unreasonable levels as competition is over fleeted." (Real Estate, Rental & Leasing)

"... business activity is currently lower than normal at this time." (Wholesale Trade)

It will be interesting to see how the pollyanna permabulls try to spin this one.