ISM Breakdown

I guess the post’s title could be taken a couple of different ways. But let’s play it straight and break down the report from my former sector of the economy.

Respondents are not in a cheerful mood as we enter what I think is going to be a pivotal Q4. From ISM

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So let’s take a glance at the numbers. The key pain points are in red. Production and Deliveries are meaningless because they lag the input stuff. New Orders are most important and they have been steadily contracting as have Backlogs. This is one area of the economy not hiring and indeed in layoff mode. The decline in Prices is slowing. Maybe nothing, may be something (for ref. out ahead in 2020).

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The strong US dollar is eating away at the sector in general and in the interest of fair reporting, it is not Trump’s fault since he is doing all he can to compromise the buck. But that is what a lurch to liquidity is, and if the markets turn and the herds seek liquidity the USD will firm even more, since it’s the global reserve currency. You can’t fight City Hall and you can’t change structural situations like this by Tweeting alone.

Moving on, here is the steady and unyielding trend in ISM.

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It’s getting bad folks, and this is in line with a Q4 view would not be pleasant. That is my favored view but I am also all-too aware of the still-buoyant Semiconductor sector (which led manufacturing and then the rest of the economy upward in 2013) and the propensity of the Good Ship Lollipop to dump manufacturing over the starboard side and simply sail on with all those strong dollars feeding the faces of Consumer Nation.

In other words, if friggin’ Goldilocks comes around prepare to meet the Trump economy… same as the Obama economy… same as the Clinton economy.*

If Goldlocks does not arrive, it’ll probably be deflation scare first and then the possibility of a Bush era style inflation. But let’s tap the breaks [←typo, as a Johnny on the spot reader informs me; but I’ll leave it there and we can all pretend that it was intentional… ref. the title & second sentence] on that until some signals appear.

* The Bush economy was inflationary, not Goldilocks.

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