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Manufacturing contracts in Nov., ISM survey shows weakest reading since April 2003

 
Redheaded Stepchild
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12/01/2006 04:13 PM
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Manufacturing contracts in Nov., ISM survey shows weakest reading since April 2003
"WASHINGTON (MarketWatch) -- The U.S. factory sector contracted in November for the first time in more than three years, raising fears that the economy could be softening so much that the Federal Reserve might have to come off the sidelines and cut interest rates to stimulate demand. ..."

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[link to www.marketwatch.com]
ECONOMIC REPORT
Manufacturing contracts in Nov., ISM survey shows
Weakest reading since April 2003
Related Blog Posts & ArticlesBy Greg Robb, MarketWatch
Last Update: 3:51 PM ET Dec 1, 2006

WASHINGTON (MarketWatch) -- The U.S. factory sector contracted in November for the first time in more than three years, raising fears that the economy could be softening so much that the Federal Reserve might have to come off the sidelines and cut interest rates to stimulate demand.

The Institute for Supply Management reported Friday that its factory index fell to 49.5% in November from 51.2% in October. This is the lowest level since April 2003. [link to www.ism.ws]

The financial markets reacted sharply to the report, with stocks falling and bond prices rallying on the fresh signs of economic weakness.

The ISM factory index has fallen for three straight months.

Readings below 50% indicate contraction in the manufacturing sector. The index had been growing for more than three years.

The decline was unexpected. Economists had forecast an increase to 51.8%, although a weak Chicago PMI report on Thursday had shaken some faith in that number. [link to www.marketwatch.com]

Impact on Fed policy
Economists said the broad-based weakness in the report may shake Fed chief Ben Bernanke's complacency that the slowdown is concentrated in the housing and auto sectors.

On Tuesday, Bernanke suggested that the economy was in transition to a moderate growth path. [link to www.marketwatch.com]

"This is not noise, seasonals, or a mid-cycle slowing, it's the real deal. The Fed hiked too far, and has already left it too late to avert a deeper slowdown than was needed," said Ian Shepherdson, chief economist at High Frequency Economics.

But other economists said the Fed would not be swayed by the report.

"The Fed is still worried about inflation overshooting its comfort zone so it will not be thinking of moving quickly," said Nigel Gault, U.S. economist for Global Insight.

Charles Plosser, the president of the Philadelphia Fed Bank and one of the central bank's fiercest inflation fighters, downplayed the significance of the report.

Plosser argued that markets should be careful about putting too much emphasis on the ISM report. "One number does not a trend make, and you always have to be careful about reading too much into one month's number," he said, according to Dow Jones newswire, explaining central bankers look at a wide array of data when deciding what to do with monetary policy. Plosser spoke to reporters at a conference in Philadelphia.

Michael Moskow, the Chicago Fed president, another senior Fed official who has been focused on the risks of inflation, said the dip in the ISM in November was not unexpected, given the Fed's forecast of below-trend growth in the near term.

"This is expected we would be running at this pace [slightly below trend] at this point in time. You would expect that as we move through 2007 we would move back toward potential growth," Moskow said.

Financial markets raised the odds significantly of a rate cut at the Fed's March meeting.

U.S. stocks dropped after the ISM data was released. [link to www.marketwatch.com]

Treasurys rallied on the weak report. [link to www.marketwatch.com]
"Until you are willing to organize your friends and neighbors and literally shut down cities - drive at 5mph through the streets of major cities on the freeway and stop commerce, refuse to show up for work, refuse to borrow and spend more than you make, show up in Washington DC with a million of your neighbors and literally shut down The Capitol you WILL be bent over the table on a daily basis." Karl Denninger

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Redheaded Stepchild (OP)

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12/01/2006 05:37 PM
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Re: Manufacturing contracts in Nov., ISM survey shows weakest reading since April 2003
book
"Until you are willing to organize your friends and neighbors and literally shut down cities - drive at 5mph through the streets of major cities on the freeway and stop commerce, refuse to show up for work, refuse to borrow and spend more than you make, show up in Washington DC with a million of your neighbors and literally shut down The Capitol you WILL be bent over the table on a daily basis." Karl Denninger

Don't blame me; I voted for Ron Paul.


Silence is consent.
Anonymous Coward
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12/01/2006 05:41 PM
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Re: Manufacturing contracts in Nov., ISM survey shows weakest reading since April 2003
Enron enconomics in action.
Redheaded Stepchild (OP)

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12/01/2006 05:44 PM
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Re: Manufacturing contracts in Nov., ISM survey shows weakest reading since April 2003
Enron enconomics in action.
 Quoting: Anonymous Coward 159943


With the same end result, but on a national level? International?
"Until you are willing to organize your friends and neighbors and literally shut down cities - drive at 5mph through the streets of major cities on the freeway and stop commerce, refuse to show up for work, refuse to borrow and spend more than you make, show up in Washington DC with a million of your neighbors and literally shut down The Capitol you WILL be bent over the table on a daily basis." Karl Denninger

Don't blame me; I voted for Ron Paul.


Silence is consent.

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