Surprise from ISM Non-Manufacturing
Written by A Forex View From Afar on Tuesday, February 05, 2008Back to www.thelfb.com
ISM Non-Manufacturing gave us today a big surprise packet as a recession warning.
The index came 41.9, far below annalyst expectations of 53. This number was also below the neutral line of 50 defining contraction from expansion. This is the first read that showed contraction since March 2003.
Out of 17 industries, only 3 reported growth, whilst 14 reported contraction, including Real Estate, Retailers and Finance & Insurance industries (no surprise here although)
Here we have some responses from the survey:
"Recession fears taking hold as cost containment strategies have been dusted off from 2002." (Finance & Insurance)
"Business is tough coming into Q1 after a very tough, unprofitable Q4. Competitive pricing is driving rates to unreasonable levels as competition is over fleeted." (Real Estate, Rental & Leasing)
Remember when Mr. Bernanke said the sub-prime won't spill over the economy? Well, it did, but he may actually have a smile or two when he reads this: 85.4% of respondents reported that the financial turmoil still didn't have any impact on their abilty to obtain credit.
Even if the sub-prime didn't have a large impact on business, it surely had on its consumers. In December, 22% of the respondents said activity was lower whilst in January this number jumped to 42%, almost double. This was a big shift in sentiment for business owners.
Apart from Exports, most categories jumped from growing, to contraction, in areas like New Orders, Employment or Backlog of Orders.
This is the second weakest read in ten years, after the 40.5 in October 2001. Maybe next time we'll manage to beat it.
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