DATA SNAP/ISM Mfg -3: New-Orders Decline Gives Warning
03 Sep 11:18
In a telephone conference after the release of the August data, ISM's Ore
said that "it looks as if the economy hit an air pocket in July, but was
holding its own in August."
Ore was at pains to emphasize that the 50.5 overall reading in August had to
be interpreted as "a slightly higher level of activity."
However, he raised a cautionary note over the decline in the new-orders
component. "Orders is the one component that is giving a warning. In July and
August, orders really haven't changed much. We've lost a lot of momentum;
another month of no change would suggest a much weaker second half of the
year."
One positive development that Ore did point to was the behavior of export
orders, which, at 52.7, were growing faster in August than July's 52.2. "The
dollar's shift is helping, especially for export orders of industrial
equipment and computers, which were both strong."
When asked about the employment measure, however, Ore was more negative. "All
the historical relationships are out the window. In previous recoveries, the
employment component registered a level of 50 by nine months after the overall
purchasing managers' index hit 50. This is a more sluggish recovery and we're
unlikely to hit 50 in nine months this time."
Ore pointed out that "people have become more risk-averse," influenced by the
negative backdrop of business scandals and flagging confidence.
"The problem with confidence is you can destroy it in a month, but it takes
much longer to build it back," he said.
-By Michael S. Derby and John McAuley, Dow Jones Newswires; 201-938-4192;
michael.derby@dowjones.com
(END) DOW JONES NEWS 09-03-02
11:18 AM |
