US manufacturing data add to woes

[RandomGuy]

A sudden drop in a key gauge of the health of the US manufacturing sector on Wednesday stoked fears that US economic activity is rapidly deteriorating amid the financial crisis.

According to the Ins ute for Supply Management, both new orders for manufactured goods and production itself saw a severe slump last month, causing a fall in the overall index to 43.5 – its lowest level since 2001. In August, the ISM index was 49.9 and economists had been expecting it to decline only slightly to 49.5.

“This extreme weakness, and the very rapid deterioration, should essentially end discussion about whether the economy is in recession,” said Goldman Sachs in a note.

Industry groups were also concerned. “[The data] indicate that the energy shock, housing collapse and financial crisis have reached a point where the recession has spread to the general economy,” said Daniel Meckstroth, chief economist for the Manufacturers’ Alliance in Arlington, Virginia. “Unfortunately, we do not expect any recovery in manufacturing activity until mid-2009.”

All the main components of the ISM index saw big drops. Orders fell from 48.3 to 38.8, while production decreased from 52.1 to 40.8 and employment tumbled from 49.7 to 41.8. The ISM index is designed so that any reading above 50 signals an expansion, while below 50 signals a contraction.

Exports continued to grow last month, according to the survey, bolstered by the weak dollar and extending what has been a crucial bright spot in the US economy since it began slowing sharply at the end of last year. Nevertheless, even export growth was showing signs of strain amid a fall in global demand, with the index moving down from 57 in August to 52 last month.

Nigel Gault, chief US economist at Global Insight in Massachusetts, said the overall decline in the ISM index may have been exacerbated by two strong hurricanes and a strike at Boeing. But he added that it was “consistent with other indicators suggesting that the real economy deteriorated dramatically during the third quarter”.

Wednesday’s dismal report comes ahead of a monthly government report on non-farm payrolls in September – a politically sensitive measure of the health of the labour market. Economists this week had been disappointed on Tuesday when the Case-Shiller index of home prices showed a 16.3 per cent annual drop in July – more than forecast.

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Financial Times Oct 1 2008--
http://www.ft.com/cms/s/0/9b4ff400-8...0779fd18c.html
FWIW

[whottt]

Time to raise their payroll and corporate taxes. That's how you create jobs[/Obama]

[RandomGuy]

Time to raise their payroll and corporate taxes. That's how you create jobs[/Obama]