There is a real risk that the worst financial crisis since the 30s will lead to the sharpest global downturn since the 1930s. The latest ISM survey is rather grim. The New York Times reports:
“Manufacturing activity continued to decline at a rapid rate during the month of December,” said Norbert J. Ore, chairman of the Institute for Supply Management Manufacturing Business Survey Committee. This index was at the lowest reading since June 1980 when it was 30.3 percent. In addition, Mr. Ore said, “New orders have contracted for 13 consecutive months, and are at the lowest level on record going back to January 1948.”
The new orders index was 22.7 percent in December, 5.2 percentage points lower than the 27.9 percent registered in November. No industry sector surveyed reported growth in December; the jobs sector particularly grim. The employment index was 29.9 percent in December, a decrease of 4.3 percentage points from November. That was the lowest reading since November 1982.
Emphasis added. The US index for new orders is at a sixty year low. Korea’s manufacturing output is shrinking faster than in the Asian crisis. Russian manufacturing is poised to shrink more rapidly than in 1998. China, Japan and Europe are all looking at manufacturing contractions too. JPMorgan’s global PMI is at — as one would expect — a record low. Edward Hugh reports that this should translate into a 10% plus contraction in global manufacturing output.
I guess macroeconomic volatility is not a historical relic after all.
My colleague Paul Swartz and the team at the CFR’s Center for Geoeconomic Studies have pulled together a set of charts to help track the current contraction by comparing current data to the average of past recessions. I personally found the charts useful — and I would be interested in your feedback as well. Are there indicators that we should be tracking that we aren’t? And are there indicators that we are tracking that aren’t that interesting? I am pretty sure Paul will be updating the charts regularly. Adding in the results of the latest ISM survey on Monday is an obvious first step …