alice

ISM Still in Contraction

We are not breaking any news here as we did in July with the shocking (well, if you’re a geek like me) news about Mori Seiki’s machine tool blow out; but we have been following the slowing trend in manufacturing growth for as long as it has been in effect.  Now ISM is in contraction mode for the 2nd month in a row with PMI at 48.2.  See ISM Report on Business.

ism report on businessEmployment dropped off and new orders remained in contraction mode.  Not sure what’s going on with imports/exports, given currency trends that seem antithetical to that.  Backlog of orders shrunk again and is a concern.  I did like this person’s response however, since my loan long positions in the stock market are in healthcare right now…

“Medical device business continues to be strong, both in the U.S. and abroad.” (Miscellaneous Manufacturing).

This business category was by the way, one of only 6 of 18 sub-industries that reported growth during the period.

Beyond that, the whole theme of economic contraction plays intimately into what may yet be 2016’s best destination, the gold sector… for all the reasons I’ve beat people over the head with for years (and will again :-) ).  While sector fundamentals have improved, macro fundamentals have not yet.  For more people to become concerned (thus moving the macro funda), we’d need the problems to bleed over from the ‘dirty’ areas like manufacturing into the economy’s ‘back end’, i.e. services.

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