On cue, all indices recently are less good – walking closer and closer to contraction. ISM non-manufacturing survey (NMI) joined the other major indices with it’s less good results.
Above 50, business is expanding. At 52.7 this survey is saying the respondents overall think business is growing. The problem is that the NMI is so new that its ups and downs cannot be correlated with a long history to the economic situation as it is unfolding. And this is a survey, a quantification of opinion. Survey’s are notoriously bad at spotting economic turning points.
However, Econintersect does give serious consideration to this survey because the service sector accounts for 80% of the economy and 90% of employment.
The ISM surveys has meaningless information when you are trying to drill into economic releases to determine the rate of change of the economy overall. Econintersect believes that new orders are the window into the economy.
The above graph illustrates the new order index portion of the NMI since inception of the index. At the current level of 51.7, is very close to the level past recessions have started.
Economic weakness is being signaled literally across all the indicators. It is real easy for a pundit to start screaming recession. When you have a mindset that the recovery was smoke and mirrors, and now that the stimulus is wearing off the economy is drifting back towards equilibrium. We must consider that the real answer might be that the Great Recession never ended.
Will the current situation be recognized in hindsight as an early realization of The Great Depression 2.0?