Economic Slowdown?

July manufacturing and non-manufacturing survey released by the Institute of Supply Management (ISM) pointed to a worrisome  outlook of the economy.

On August 1, 2011, the market took a sharp dive soon after the debt-deal relief rally. The sharp dive coincided with a shocking ISM manufacturing index for July that came in at a disappointing 50.9 vs a 55.3 reading for June. Although any reading above 50 indicates monthly expansion in business conditions but the reading  is now at the slowest rate so far of the recovery. Most troublesome are new orders and backlog orders data. New orders at 49.3, a little below break-even 50, indicated a contraction. This is the first sub-50 reading since June 2009.Backlog order dropped to the territory of contraction to 45.0 for the lowest reading since April 2009.These two figures pointed to more slowdown in manufacturing in coming months.

The ISM non-manufacturing pretty much echoed the
 manufacturing counterpart.A second month of slowing
in new orders and deepening contraction in backlog orders undercut strength in the ISM non-manufacturing composite index for July that edged only slightly lower to a 52.7 level that indicates moderate monthly expansion compared to June. New orders, which were in the 60s as recently as March, fell nearly two points to 51.7 and are now testing the monthly breakeven level of 50. Backlog orders are already well below 50, down 4-1/2 points in the month to 44.0. Weak orders do not point to overall strength in the months ahead.