Monday, July 02, 2012

Slipping Back Into Recession?

I wasn't aware that we had actually slipped out. But what is clear is that the economy today is even worse than it was a few months ago.
New data suggests the three-year economic expansion — as anemic as it has been — may be at an end, or is at least perilously close. The Institute for Supply Management’s factory index unexpectedly fell to 49.7 in June from 53.5 a month earlier. A reading of less than 50 signals contraction. Not one of 70 economists interviewed by Bloomberg thought it would be below 50.5.

Here is RDQ Economics:
The drop of 12.3 points in the orders index is the largest since October 2001 (when, in the wake of 9/11, the index dropped 12.4 points) and the second largest decline since December 1980. Thus we are dealing with an event that occurs in roughly one in 100 reports. …  Our best guess is that manufacturing growth is downshifting (but still positive as suggested by the relative strength in the employment index) and that commodity prices will stabilize and recover somewhat. However, uncertainty about the state of the economic expansion just got ratcheted up a notch with this report.


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