While the “technical” recession in the U.S. can be brushed aside as extreme volatility in trade and inventories, there are more and more signs that recessionary forces are starting to feel “real.” That’s according to ING Economics. Residential construction is experiencing the pain from rising mortgage rates, but the bad news is now spreading more broadly to manufacturing.
New orders dropped to 48 from 49.2, so below the breakeven 50 level indicating expansion/contraction. This is the second sub-50 print in a row while order backlogs slowed to the lowest level since June 2020. That points to falling output in months ahead, ING’s chief economist, James Knightley, says.
Still, ING managed to find two pieces of good news. First, employment rebounded to 49.9 from 47.3. It is fractionally in contraction territory still and likely reflects the ongoing struggle to find skilled workers, but it means manufacturing employment shouldn’t be a particular drag in Friday’s payrolls number. Second, prices paid plunged to 60 from 78.5, presumably as the steep falls in gasoline/fuel/commodity prices provide relief for manufacturers. In fact this is the lowest prices paid index since August 2020