ISM Falls to 50.7

The Institute for Supply Management's ISM number came in at 50.7, below the 51.5 consensus expectation. I remember when I was a newbie a few years back and didn't think that highly of this indicator. Boy, was I wrong. This number is one of the top indicators for the economic performance of USA. Value investors may not pay attention to economic indicators but I do (watching economics also avoids value traps like homebuilders, which many value investors have fallen into). I think ISM is a quite a good and robust indicator. Unlike many other measures it isn't as prone to revision.

(source: bullandbearwise.com)


A number that is below 50 is considered to be economic contraction and is generally a precursor to significantly weak economic growth (i.e. recession or slowdown). As I have remarked in the past, this is one of the key indicators that John Hussman mentioned in his recession signals.

(On an unrelated note, I notice that Big Oil is missing their earnings. Oil has been going up almost every day lately (likely due to US$ decline) but oil stocks are not posting good numbers. Is this the peak for the oil&gas sector?)

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