While one data point doesn’t necessarily make a trend, it pays to understand what could happen should this indicator fall further in upcoming releases.
CLSA: CLSA’s head of economic research Eric Fishwick notes that the regional PMIs in September are showing a much more mixed picture than in August. Thus, the Chicago PMI released yesterday was much weaker than expected, falling from 50.0 in August to 46.1 in September. This is a warning indicator that the ISM index could be running out of steam. Fishwick’s formal view is that the last positive ISM data point will be the September number announced today, after which it will become apparent that the restocking phase in America has ended meaning that manufacturing orders will weaken in 4Q09.
Should the ISM’s green signal burn out, the S&P500 could be in for a tumble.
(Via CLSA, “GREED & Fear”, 1 October 2009)