The ISM manufacturing index's orders-to-inventory ratio has plummeted, and historically when this ratio has been so low then a recession was soon to follow.
Mr. Rosenberg says this means we're set for the ISM to drop below 50 in the coming months, which would indicate a contraction of manufacturing activity, and is something Deutsche Bank also forecast just last week.
May: 1.44x June: 1.28x July: 1.07x August: 1.03x September: 0.98x
Ouch! Detect a pattern here, folks? The orders-to-inventory ratio is all the way back to January 2009 levels, when the economy was knee-deep in recession. All we can tell you is what the historical record says — at this level in the past, the economy slipped into contraction 75% of the time.
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