Manufacturing Activity Contracts

The ISM Manufacturing Index contracted for the first time in a while in December. The index dropped to 47.7 from 50.8 (any reading below 50 is a contraction in manufacturing activity). A prolonged value below 50 is often a precursor to a recession, although the index can drop below 50 and then bounce back up. Although the service sector is far more important for most developed economies, the manufacturing index still plays a good role in indicating the condition of the US economy. It bears watching what happens over the next several months. Odds are increasing in favour of a material slowdown in the US economy.

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