The ISM PMI came in at 43.5 for September………
This is way below August’s 49.9 level and represents a significant hiccup versus consensus expectations of 49.5. We can expect a deeper contraction ahead in manufacturing. In fact, at these levels, the reading points to a very high risk of a contraction in the overall economy. How wonderful—-but we already suspected that.
If you read the report online, pretty much all of the sub-components that make up this index took it in the shorts (employment, exports, new orders, backlog of orders, etc).
Bottom Line: The next wave of the credit crisis might be gaining more traction, perhaps signaling an even longer and deeper recession than currently expected. We have not seen the market lows yet, no doubt.
My best case scenario has the market making a bottom sometime in Q4:2008, but prepare for an extended period of time going into 2009 before we might see this thing bottom out.
I don’t have time now, but I’ll try to post something later on about the credit markets and how to best monitor the situation in that cesspool.
Later.
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