The Institute for Supply Management's factory index fell to 38.9 from 43.5 in September; 50 is the dividing line between expansion and contraction. The Commerce Department said separately that construction spending fell for the eighth time in 10 months in September.
Today's report may add to pressure for further interest-rate cuts and an additional federal package of tax and spending measures. The figures also showed the weakest level for U.S. export orders in the two decades the ISM has kept the data, a sign of slowdowns in Europe and Asia.
Let's break this down sentence by sentence.
Manufacturing in the U.S. contracted in October at the fastest pace in 26 years as it got tougher to obtain credit and faltering economies abroad eroded prospects for American exports.
It's been a quarter of a century since we've seen a manufacturing number this bad. We have to go back to 1982 -- one of the worst recessions of the last 50 years -- to see a number this bad. When numbers show up in bad recessions you know you've got problems. Here's chart that shows today's number in perspective:
Today's report may add to pressure for further interest-rate cuts and an additional federal package of tax and spending measures.
Interest rates are at 1% -- which means we're essentially at 0% after adjusting for inflation. We don't need to lower rates any more; they're about as low as we can go. However, I do agree we need fresh spending measures for the economy.
The figures also showed the weakest level for U.S. export orders in the two decades the ISM has kept the data, a sign of slowdowns in Europe and Asia.
Exports have been one of the only bright spots in the economy over the last year or so. In the last GDP report, exports and government spending basically kept the economy afloat:
What happens if we take exports out of that equation?
Bottom line: today's news stinks.