By Simon Bond

The ISM Manufacturing survey is a direct survey of manufacturers in the US.

Generally speaking, indexes above 50% indicate growth and below indicate contraction. Every month ISM publishes survey responders' comments, which are part of their survey. This month the comments were horrific.

While some say low gas prices are hurting them, most talked about weak demand and cutting their inventories.

The December ISM Manufacturing Survey was in a word, awful.

Manufacturing is in a second month of contraction and this time slightly deeper than November. PMI was 48.2%, -0.4 percentage points lower than the previous month. New orders is still in contraction and employment plunged and went into contraction.

Only six sectors showed any growth according to the survey. A contracting manufacturing sector two months in a row is not a good sign and this survey is highly correlated to other economic metrics.

ISM Manufacturing index

New orders increased by 0.3 percentage points to 49.2%. This is in contraction for the 2nd month, but slower than last month. When we overlay a chart of the Dow Jones index the picture depicts further falls to come in stock markets as the ISM Manufacturing index is generally seen as a leading indicator.


Earning season kicked off last week in the US and the outlook for the market over 2016 will be set over this period. If earnings come in below expectations and this looks increasingly likely then the US Federal Reserve may very well have to reverse course on it's planned interest rate hike cycle.