U.S. Manufacturing Shrinks

http://money.msn.com/business-news/article.aspx?feed=AP&date=20120702&id=15289567

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"It is not our job to protect the people from the consequences of their political choices." (Chief Justice John G. Roberts, Jr. on the Supreme Court's health care ruling)
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The headline here is that U.S. manufacturing has shrunk in June for the first time in nearly three years. The Institute for Supply Management (ISM) index has been closely watched by those of us in business for the last 30 years. This is essentially a trade group of purchasing managers that puts out a number each month which gauges manufacturing activity very accurately. When the number is above "50," things are good. Below 50, not so much.

The ISM index number for May was 53.5. The index for June was 49.7. It's not just that the number was below 50. It's that it was going in the wrong direction and had dropped 4 points month-to-month. It's the lowest reading since July, 2009 - a month after the Great Recession "officially" ended.

Economists said the index was consistent with GDP growth of 1.5%. There are many economists that feel it takes 2.5% GDP growth to keep the unemployment rate from going up.

China keeps an ISM index which is computed the same way. While I don't know the "number" for June, I do know that their number "grew" in June by the slowest pace in seven months.

The saddest part of the U.S. number is that it overshadowed more positive news on housing where U.S. construction spending rose for the second month in a row. And gas at the pump, where prices are usually going up at this time of year, has literally dropped 60 cents a gallon from its 2012 peak.

But, the ISM number is consistent with the overall hiring numbers where employers have added an average of 73,000 jobs per month in April and May. Dreadful. The first three months of 2012 averaged 226,000 jobs per month added to payrolls.

Maybe the only positive sign here is that there are some good numbers mixed with the bad!