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What is the ISM saying?

Written by A Forex View From Afar on Wednesday, January 02, 2008

What is the ISM saying?
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The Institute of Supply Management manufacturing numbers for December didn't report very well for the US economic outlook in 2008. It seems that in December there was a shift of power, from the Manufacturing Industry growing, to a contraction now, and in doing so breaking a 10 months run of positive reads.

It seems as though all Industries are suffering (see some of the Respondent's responses), except those in the the Export industry which up untill now is growing, albeit if at a slower pace then before.

In November export index came 58, and in December it printed at 52, a six percent decline.

The worst of all is that we see an increase in prices, showing that inflation from raw materials is starting to pick up. Prices are increasing on the back of a 12 month trend, and to add gas to a fire, all of the monitored Commodities showed price increases. All Commodities are on an uptrend in prices, as experienced by business' for 2 or more months.
I really wonder when the CPI will start to pick up on the Inflation number? We, at the thelfb.com related about this in the article called: Inflation? The ‘When 1+1 = Anything But 2″ Theory

To conclude; US Manufacturing has decline from growth to contraction, but with all that said, the overall US economy has a 74 month growth pattern to break...

To all the readers out there, here is a question; When do you think that the "overall economy" will be downgraded to "slowing" or "contraction"? Click this Link to cast your Vote.

I say 3 months, and I am about to cast my vote now. If we get to hear the official word 'Contraction' what will happen to the Dollar. One commentator said recently that it is going "to Hell in a Handbag". What do you think?

Here is what respondents have answered:

  • "Have received a large volume of price increase notices in the last month with increases between 3 percent to as much as 15 percent." (Chemical Products)
  • "Business is good, but higher raw material prices are squeezing margins." (Primary Metals)
  • "The heavy truck industry is not recovering as expected. The latest forecast does not show an increase in orders until Q3 2008." (Fabricated Metal Products)
  • "General business conditions are slow." (Paper Products)
  • "Upward price of raw materials, plus low inventories, is pushing price of resins skyward." (Plastics & Rubber Products)

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There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

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