The fiscal cliff is negatively impacting new orders and jobs in US manufacturing

Yesterday the ISM Manufacturing Report on Business came out and it showed a large decline in the US manufacturing sector. The headline PMI number of 49.5% means that the US manufacturing sector is below the 50% threshold that separates expansion and contraction. The best interpretation for why the manufacturing sector has taken a tumble is the fiscal cliff.

If one looks at the ISM sub-indices a more nuanced picture emerges. Production has actually increased from 52.4 to 53.7. So the manufacturing sector will add even more to GDP in Q4 2012 based on November's production than October's. And this has nothing to do with inventory building as the inventory sub-index moved to contraction from unchanged. The reason that the PMI has faltered has everything to do with forward-looking subindices...


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