US Manufacturing Shows the Pressure

The manufacturing conditions index produced by the US Institute of Supply Management has remained in the sub-50 range for four consecutive months after passing through the critical “50” level in October. The chart shows swings in the ISM index and corresponding movements in the S&P 500 share price index over the past six decades. The most recent downward push in the share market index is historically consistent with the direction of the ISM index. Further market weakness could be anticipated based on the recent momentum of the ISM measure. The new orders subcomponent of the ISM survey results which turned positive for the first time in three months after having moved lower throughout 2015 hints at some recovery. Data for a single month will be insufficient to permit any conclusion about a possible change in direction but this indicator warrants watching over the coming month as a sign that US manufacturers may be extricating themselves from the negative exchange rate effects impacting their businesses and able to impart some additional growth momentum.