- by New Deal democrat
Because manufacturing is much less important to the economy than in the decades before the Millennium, the economically weighted average of the ISM services index (75%) as well as manufacturing (25%), especially over a three month period, has been much more accurate since 2000.
In March the expansionary headline and new orders readings in the ISM services report decelerated sharply, to 50.8 and 50.4, respectively. As 50 is the dividing line between expansion and contraction, these are just barely expansionary. The three month average of each also declined from 53.4 to 52.8 and from 52.6 to 51.3 respectively.
Here is a graph of both the headline number (blue) and the new orders subindex (gray) for the past year, showing that they are both now in clear downtrends:
More concerning is that these are now compared with contractionary readings from the manufacturing index.
For March alone, the economically weighted headline average was 50.4, but the new orders weighted average fell into contraction at 49.1. The three month economically weighted average for the manufacturing and non-manufacturing indexes combined is 51.8 for the headline, and 50.9 for new orders.
Because it is only one month in the new orders component that has fallen below 50, we aren’t quite in the yellow caution zone yet. But if next month’s readings duplicate this month’s, the new orders component will give at very merit the yellow caution flag.
Possibly not the best time to intentionally start a trade war.
