There are a lot of indicators that have been published recently that show continuing weakness in the economy which will lead to declines in output. The key indicators to me are the decline in factory orders and the build-up of inventories. I expect this trend to continue.

The important indicators are:

ISM Manufacturing Index

Lagging factors gave what is a bit of a deceptive boost to the ISM’s manufacturing index masking a further slowing in the key leading index of new orders. The PMI came in at a stronger-than-expected 56.3 for a sizable eight tenths gain from July. The reading is well over 50 to signal month-to-month growth and in the comparison with July, to signal growth at an accelerating rate. But this growth is in general business activity: production, employment, inventories. These three factors all accelerated in August with a special note on inventories where the gain may reflect in part an unwanted build.

Here is the money comment (Emphasis, mine):

New orders slowed but just a bit, down four tenths to 53.1 for its lowest reading since the manufacturing recovery began in the second quarter of last year. Unfilled orders also slowed, down three points to 51.5 and its weakest reading since December. The slowing in order build is certain to limit future improvement in business activity.

From the Wall Street Journal

What has not been encouraging is the slowdown at the wholesale level as June inventories rose 0.1%:

From the Wall Street Journal

We will have to wait until the week of the13th when the wholesale inventory numbers for July come out to see if this trend is continuing. … Continue reading Important Manufacturing Indicators Look Weak