History may not exactly repeat itself, but it certainly does rhyme.  We continue to notice strong similarities between 2008 and the present. 


Today the ISM non-manufacturing index posted a larger than expected fall in April to 52.8; the weakest reading for this index since August and most of the Index’s components were feeling the same pressure.  That magnitude of the drop shown in today’s April number is unnerving with the 4.5 point month-to-month decline the largest in more than two years.


Most of the survey’s components weakened in April, including the forward-looking new orders index, which plunged 11.4 points to 52.7 and the business activity index, which fell 6 points to 53.7.  Showing smaller declines were the employment index, which fell 1.8 to 51.9 and backlogs, which fell 0.5 to 55.5.  Supplier deliveries gained 1.5 to 53.


In addition to the ISM Non-Manufacturing Index slowing, the ADP number for April was equally disappointing; the ADP figure of 179,000 was below consensus of 198,000 and last month’s revised 207,000.  The combination of the ADP number and a weak ISM Non-Manufacturing survey increases the chance that the Friday jobs picture will also miss expectations.  That ISM survey’s employment index has hit its lowest level since September 2010, a month when private net job creation was closer to 100,000.


What is the ISM telling us about the potential for GDP growth going forward?  For the first three months of 1Q11, the ISM nonmanufacturing index averaged 58.8, which coincided with 1.8% GDP growth.  With the index at 52.8 in April and the manufacturing side of the economy slowing, it’s quite a stretch to arrive at the consensus GDP growth number for 2Q11 of +3.2%.


Howard Penney

Managing Director





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