Manufacturing in the U.S. contracted in October at the fastest pace in 26 years as the credit crisis deepened and companies reduced orders.Prices Paid Collapses
The Institute for Supply Management's factory index dropped to 38.9, worse than anticipated by economists surveyed by Bloomberg News and the lowest level since September 1982, the Tempe, Arizona-based group reported today. A reading of 50 is the dividing line between expansion and contraction.
The purchasing managers' gauge of new orders for factories decreased to 32.2, the lowest level since 1980, from 38.8 the prior month. The production measure fell to 34.1 from 40.8.
The index of prices paid dropped to 37 from 53.5. Energy prices have plunged from their peaks in July, when a barrel of crude oil reached $147.
The employment index decreased to 34.6 from 41.8 in August. The economy has lost more than three-quarters of a million jobs so far this year.
Orders from overseas have weakened as economies abroad falter. ISM's export gauge dropped to 41, the lowest reading since records for this component began in 1988.
Pay particular attention to that prices paid category, now at 37, down from 53.5. As consumer demand slackens, expect retail prices to drop as well. From my point of view, this is a good thing. Furthermore, I am sticking with a a forecast that has the CPI going negative in the months ahead, regardless of what the Fed does.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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