Another Recession Warning: ISM Contracts 4th Month

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ISM fired another recession warning today as the manufacturing contraction extends another month.

The November 2019 Manufacturing ISM® Report On Business® has some grim statistics.

  1. PMI, new orders, production, and employment down 4th month
  2. Prices and inventories down 6th month
  3. Backlog of orders down 7th month
  4. New export orders contracting

GM Strike Ended

The GM strike ended on October 25. The Econoday consensus expected some improvement. Nope.

Tariffs

Today, in a surprise Tweet, Trump Restores Steel and Aluminum Tariffs for Argentina and Brazil.

This will raise input prices on US manufacturers when prices have fallen for 6 months.

Perhaps Trump still expects a deal with China but China is demanding more than Trump wants to give.

Phone Chips

Also recall Trump banned US companies from buying US-manufactured chips for its phones.

Guess what?

China was once very dependent on US chips for its phones. The Latest Chinese Phones Have No US Parts.

Trump has since rescinded the parts ban, but now it's too late. Trump cut off supplies so China looked elsewhere.

US farmers are still suffering.

Another Recession Warning

Here's yet another recession warning: Freight Volumes Negative YoY for 11th Straight Month.

Trump's trade policies have been an absolute disaster.

No, we are not "winning big" no matter how many times Trump repeats that lie.

Mike "Mish" Shedlock

Comments (25)
No. 1-7
Casual_Observer
Casual_Observer

The real question is whether GDP will continue to hover between 0 and 2% or go actually go negative. My bet is we don't go negative. Supply chains are adjusting to new realities in trade. There will be periods of stuffing the channel because of trade issues which cause inventory overhang which lead to slowdowns in manufacturing. Trump has been a net positive for some southeast Asian countries.

FWIW, you are way off the China chip thing. China was never that reliant on US chips as there were always alternate suppliers in Europe and Asia. China also has their own domestic chip capabilities with Huawei's HiSilicon (both arms of the Chinese government).

At some point you may see US chip companies just change their HQ address some non-US location to sell back into China. Most smaller US chip companies already do this with incorporated addresses in places like Bermuda despite having most of their employees in the US. They are at a huge advantage now as they can sell into China while larger US-based competitors can't.

Tony Bennett
Tony Bennett

Black Friday weekend sales.

Normally - when sales are good - you can't turn on the tv without someone saying how awesome things are. This year? Silence was DEAFENING.

Of course, online sales saw big gains, but still much smaller than B&M. Did find this from Forbes:

By comparison, things were not so sunny at malls and shopping centers this past Friday. RetailNext provided an early look at in-store shopping activity across tens of thousand of stores operating under its RetailNext smart-store platform.

The results: Traffic was down 2.1%, average transaction values dropped 6.7%, and overall sales declined 1.6%.

njbr
njbr

Nattering nabobs of negativism...

The market''s going up, because it's going up.

Isn't that enough for you?

Realist
Realist

Every week, you have stories about “growth surprises upward” or “things are getting worse”. I will stick with my steady 1% growth prediction going forward. Unless Trump does something really stupid.

5 Replies

Scooot
Scooot

Isn’t 1% growth a negative real return?

Realist
Realist

Hi Scooot. My prediction is 1% real growth for several more years (on average). How that affects businesses and individuals will vary widely.

Scooot
Scooot

Ah Ok, I'm bearish on equities. i don't think the risk/reward stacks up so think they'll fall quite a bit. Just my opinion though. -:)

Realist
Realist

Hi Scooot. Equities comprise a small percentage of my overall assets. I prefer to be diversified in a wide range of asset classes all over the world. Having said that, the cash percentage in my equity portfolio typically varies from 10-30%. It is currrently 30% because I sell the rips and buy the dips. I’ve been doing that for 10 years now. It’s more of a hobby; not a significant part of my overall investment plan. I suspect that this will simply be another short-lived dip which will allow me to buy some bargains that I sold at higher prices over the last few weeks.

Most dips are so quick (3-5%) that I can barely buy much at all. The odd 10% dip allows me to load up using around a third of my cash. Bigger dips are very rare, but if they arise, I allocate up to two thirds of my cash.

I do not expect a big crash or a recession any time soon. Governments, central banks, et al, will do “whatever it takes” to keep things moving along.

Scooot
Scooot

Yes of course a diversified portfolio is very important. I didn’t mean to suggest otherwise.

numike
numike

I need to mark my calendar, when does this coming recession occur?

thegatewayprocess
thegatewayprocess

We are nowhere close to market euphoria and irrational exuberance. We are in the healthy stages of doubt, worry, and confusion, especially with the China/USA trade issues. Our markets will continue to churn upward on the same doubt, worry, and confusion that has gotten us here. Nothing is broken with the absolute unknowing of the things we know nothing about with any certainty except the uncertainty of the Trump Administration. Uncertainty and hope have out maneuvered lack of faith, fear, and panic in our US markets and will continue to be fed more good news than bad news to keep the momentum to Blue Sky markets going into 2024 and beyond. No major recession until after 2032.

klausmkl
klausmkl

ES futures monthly chart shows bearish rising wedge