Ghoulish ISM report spooks the market

TUE, OCT 01, 2019

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

AS OF TUE, OCT 01, 2019 • 12:07 ET

DJIA		26653.15
		-0.98%	-263.68

S&P 500		2950.33
		-0.89%	-26.41

NASDAQ		7940.20
		-0.74%	-59.13

EDITOR'S NOTE

(And with that, I'm done for the month with Halloween puns.)

Now, we've talked before about the ISM (Institute for Supply Management) manufacturing survey. It's a survey of corporate purchasing managers about their business conditions that comes out the first of every month and has a pretty long and pretty decent track record as a leading indicator for the economy.

The latest reading came out at 10 a.m. ET and it wasn't pretty. The index fell from 49 in August-- which was just below the 50 level that implies the manufacturing sector is in contraction--to 47.8 for September, the lowest reading in a decade. Ouch.

The details were even worse: the employment gauge dropped a point to just over 46, a nearly four-year low; new orders were basically flat at 47; and--and this is crux of it--the export sub-index slid all the way down to 41, also its worst reading since 2009.

As Peter Boockvar, who'll join us on the show today, put it: "We've tariffed our way into a manufacturing recession."

But here's the thing: that's still no guarantee of an overall downturn. We know why manufacturing is struggling. We know it's still just 10% of the U.S. economy. We also know the consumer has been incredibly strong throughout all of the trade and tariff headlines this year.

So while it's classically true, as Deutsche's Torsten Slok reacted, that an ISM report this bad "is serious," it's also true that the major averages are only down about half a percent right now. As the ISM survey chair himself pointed out, any readings above 43 translate to a growing overall economy.

It's unfortunate, though, that the growth pace isn't quicker. September's level for the ISM translates into roughly a 1.5% reading for GDP, after we've already slowed to a 2% pace since the start of this year. The worst part is that such anemic growth leaves us in the dreaded "40% recession" zone, as I like to call it: breaking neither obviously into recession, or out of the danger zone entirely.

Just think of how much better all the oxygen wasted on this debate over the last, oh, decade could have been spent!

See you at 1 p.m...

Kelly

Kelly Evans
@KellyCNBC

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