Calling it “unexpected,” Reuters reported that the Purchasing Managers Index (PMI) from the Institute for Supply Management for November fell to its lowest level in over three years. A poll of economists by Reuters showed they didn’t see it coming.
The PMI covers the private sector and quizzes 400 purchasing managers in 18 different manufacturing sectors to get their view of market conditions from their perspective: better than last month, same as last month, or worse, along with any comments they wish to make. Any reading above 50 indicates the sector is growing, and below that it’s contracting.
Bradley Holcomb, the chairman of the survey committee, said:
The PMI registered 49.5 percent, a decrease of 2.2 percentage points from October’s reading of 51.7 percent, indicating contraction in manufacturing for the fourth time in the last six months. This month’s PMI reading reflects the lowest level since July 2009 when the PMI registered 49.2 percent.
The New Orders Index registered 50.3 percent, a decrease of 3.9 percentage points from October, indicating [slowing] in new orders for the third consecutive month…
The Employment Index registered 48.4 percent, a decrease of 3.7 percentage points, which is the index’s lowest reading since September 2009 when the Employment Index registered 47.8 percent.
Holcomb noted that unsolicited comments from the purchasing managers also reflect the slowdown:
From Food, Beverage & Tobacco Products: “We are in a lull.”
From Plastics & Rubber Products: “Differences between [the] first half of [the] year and [the] remaining half are very dramatic, growing to a peak in the middle of the year with a gradual decline since.”
From Computer & Electronic Products: “Seeing a slowdown in requests for quotes [RFQ] activity.”
From Electrical Equipment, Appliances & Components: “Seeing a slowdown in demand across [all] markets.”
From Transportation Equipment: “Economy is every sluggish. Production is down and orders have slowed considerably from Q1.”
This report may have surprised the economists polled by Reuters but it certainly didn’t surprise Lakshman Achuthan, chief economist at the Economic Cycle Research Institute (ECRI), who called for another recession back in September, 2011. Following the prediction, The New York Times noted that ECRI not only correctly called the beginning and the end of the last recession, “it has gotten all of its