ISM weakness could trigger US recession scare
Simon Ward
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A sharp fall in the widely-watched ISM manufacturing new orders index may intensify worries about emerging US economic weakness – June results are scheduled for release on Monday.
A post two weeks ago suggested that the orders index would decline based on softness in retail sales volumes and a pick-up in earnings downgrades. The forecast has been confirmed by weakness in Federal Reserve regional manufacturing surveys (four out of five released to date) as well as the Korean FKI poll – Korea’s economic structure makes it especially sensitive to the global / US business cycle.
The first two charts below suggest that ISM new orders will fall to about the breakeven 50 level or lower in June or July. Interestingly, a decline is also suggested by the historical cyclical pattern, though to a lesser degree – third chart. A recession signal would require a break below 45 – unlikely.
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