US has worst month of manufacturing in two years
July’s statistic, released today out of the Institute for Supply Management, comes only days after Reuters unearthed a report that the gross domestic product of the US was also at a two year low.
And though markets proved to initially surge after Sunday’s debt deal, the release of the newest numbers relating to the manufacturing sector have since signaled an immediate decline (once again) in global markets. Japan’s Nikkei index was the first major international stock market to open on Sunday, and following what was believed to be resurgence in the global economy thanks to America thought to be getting back on its feet, the Nikkei was up 1.7 percent. Stateside, the Dow went up 1.5 percent and the S&P 500 index rose by even more.
Panic is already returning to Wall Street and Main Street, however, as the figures released by the Institute for Supply Management show that both nationally and globally, the recession that ended two years ago is still playing a detrimental role in the international economy. After the ISM data was revealed, the S&P dropped 0.6 percent within hours.
"It's definitely bad. On the badness scale, a 10 being an unmitigated disaster, I'd probably make this a six," Joseph LaVorgna, chief U.S. economist at Deutsche Bank, tells CNBC. “The only thing not bad is it looks like the debt ceiling is front and center in this."
The manufacturing statistics for last month conclude that the national factory activity in America dropped from 55.3 in June to only 50.9 last month. Economists had predicted that last month’s figures would actually show a much smaller drop to a rating of only 54.9.
A reading of below the 50-point mark means that the manufacturing sector is shrinking. Manufacturing makes up around 12 percent of the total GDP. Household consumer spending, which makes up nearly three-fourths of the country’s economic activity, rose only 0.1 percent for last quarter.
Internationally, the Global Manufacturing PMI, put together by JPMorgan, slumped to 50.6.
"Growth of the global manufacturing sector drifted closer to stagnation in July. Hopes of a near-term acceleration may have also been knocked by a slight retreat into contraction territory by the new orders index," Joseph Lupton, global economist at JPMorgan, tells Reuters.
In regards to a shrinking GDP, HIS Global Insight economist Nigel Gault told Bloomberg last week that his hopes for a rebound in the second half of 2011 were “melting away.”