What’s Underneath the Monday Crash Tremors
View full size
Crown copyright (open government license)
January 4, 2016 (EIRNS)—The "trigger" for the worldwide plunge of stock markets on Jan. 4 was claimed to be China’s Industrial Purchasing Managers’ Index, which showed contraction for the 12th consecutive month (December). This despite the sharp drop in bank stocks with the initiation of the devastating "bail-in" policy across Europe and the United States; and despite Saudi Arabia’s clear threat to escalate general religious war across the Mideast and North Africa. Those clearly had more impact on the stock markets’ Monday rout.
But underneath that rout, North American industrial data are also again showing sharp contraction. The December ISM [Institute for Supply Management] Manufacturing Index was shrinking at 48.2, worse than its 48.6 reading in November. The Chicago Purchasing Manager’s Index (released Dec. 31, for December) plunged to a dismal 42.9, after 48.7 in November. The most recent Dallas Fed survey (December) must have set a contraction record, -20.
These are data characteristic of the mass-unemployment year of 2009. The Canada Purchasing Managers’ Index for December was at 47.2, even lower than anything in Canada in 2009. U.S. construction spending also fell in November; so did American imports.
Immediately after these reports, the recently accurate Atlanta Federal Reserve Bank announced that its
"GDPNow forecast for real GDP growth fell 0.5 percentage points this morning following the Census Bureau’s release on construction spending and the Institute for Supply Management’s Manufacturing ISM Report On Business."
Its fourth-quarter growth rate forecast is now only 0.7%, whereas it was 1.3% just two weeks ago.