Thursday’s ISM report showed a gauge of imports fell to the lowest since May 2017, while an export orders index climbed from an almost two-year low for its first gain in three months. Fiore noted that exports will likely continue weakening as global demand wanes, companies fail to pass down price increases and margins tighten.
The measure of new orders and the reading for production both eased to the lowest since 2016. The index of supplier deliveries slumped to a one-year low, indicating bottlenecks remain but are easing.
“The deterioration in the survey data over the past several months has contributed to our view that recession risks have increased,” Daniel Silver, an economist at JPMorgan, said in a note.
Recession indicators are picking up. Economists surveyed by Bloomberg last month lifted their odds of contraction in the coming year to 20 percent from 15 percent, the first rise in 18 months. A New York Fed gauge puts the chances of a recession at almost 16 percent a year from now, according to the latest available data. That’s the highest probability since 2008.
Gloomier data may give Fed policy makers, who have already said they intend to slow the pace of interest-rate hikes, more reason to pause. Ahead of the ISM report on Thursday, Dallas Fed President Robert Kaplan said the central bank should put rates on hold as it waits to see how uncertainties about global growth, weakness in interest-sensitive industries and tighter financial conditions play out.
Meanwhile, ISM prices paid gauge fell to the lowest since June 2017. While that may largely reflect the recent plunge in oil, it adds to signs of tame inflation that provide little urgency for Fed rate hikes.
What Our Economists Say
While there could be a rebound in the near term if a trade deal is reached between China and the U.S., the underlying moderation in economic activity projected in 2019 likely means that we’ve already seen conditions peak. After months of having only a minimal impact on the sector, trade tensions appear to be finally weighing meaningfully on demand for manufactured goods.-- Tim Mahedy and Carl Riccadonna, Bloomberg Economics
This article provided by Bloomberg News.