Largely immune from the economic and financial tribulations which beset most of Europe and parts of Asia during the first half of this year, it now turns out that America is in trouble as well. Today’s manufacturing ISM for June was a warning sign that all is not well across the pond. Particularly worrying was the collapse in new orders, which plummeted from 60.1 in May to a 3yr low of 47.8 last month, as well as new export orders, now below 48 for the first time in more than three years. The backlog of orders fell once again, inventories are low, production fell sharply and the overall index was under 50, which usually presages a recession. Obviously, the trials and tribulations of Europe and Asia/China have resulted in increased hesitation on the part of US manufacturers, at a time when demand from offshore has clearly been weakening.
This ISM outcome implies more QE from the Fed, spells trouble for President Obama and will divert some safe-haven demand away from the dollar towards the yen.