The ISM Drops for the 2nd Month in a Row
This quote clipped from the WSJ.com site:
"The U.S. manufacturing readings were among several data points released Tuesday pointing towards the global impact of the U.S.-China trade war, as trade flows are set to grow this year at the weakest pace since the financial crisis, with rising tariffs and cooling growth. The Institute for Supply Management reported its manufacturing index fell to 47.8 in September, the lowest level since June 2009, from 49.1 the prior month. Readings below 50 indicate contraction, while those above signify expansion. The August result marked the first drop in three years."
My Take: I can't say it any better than the above. Two months in a row is the start of a trend and there is no denying it now. Combining yesterday's Chicago PMI, manufacturing is definitely slowing.
Now, I could see Powell lowering rates and being justified, I bet he wishes he had those two previous rate cuts in his pocket now. The Fed should get aggressive, and they have a lot of tools in their kit to do so. QE here we come again. Let's also remember that we are a services-consumer led economy, 75% to 85% or so.
There is no denying that manufacturing punches above its weight in the employment and services that are built around it. That said, there are domestic areas of strength. Once again, housing showing strength; last night Lennar (LEN) had an exemplary earnings report that beat new orders which are up 9%, beat profits and beat revenue. The consumer is very strong; lowered car sales numbers were affected by the sales period being shorter than last year. If you look past that, we are on track for a 17 million annual sales rate for cars.
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