– by a New Deal Democrat
As usual, we start the month with data on last month’s manufacturing activity and the previous month’s construction activity. Both were negative this month.
The ISM manufacturing index, which has excelled as a leading indicator over the past 75 years, fell to 46.3, its lowest level since the pandemic recovery began. The new orders index, the top leading component, also fell to 44.3, above a low of 42.5 in December:
According to the ISM, levels below 48 have historically corresponded to recessions. Needless to say, that’s what the index is saying about manufacturing now (and consistent with what the new regional federal government orders indexes have been saying for months).
Total spending and housing construction spending in February also decreased, the former by -0.1%, the latter by -0.6%. Total construction spending, the laggard of the two, appears to be peaking, having increased just 0.2% since last November. Housing spending, the most important component, may have bottomed out, having declined by just -0.8% since November:
As these are nominal readings, I have deflated them with the special PPI for construction materials, which fell sharply between last May and December, but rose in the two months since. Here’s what the reduced numbers look like:
In real terms, both have declined, and the leading housing number has declined almost consistently for a year.
In short, both the leading manufacturing and construction sectors are likely to be contracting.