US manufacturing has slowed in recent months, and we expect more to come.  We had noted the discrepancy between the PMI and ISM surveys earlier this year as it looked like the ISM was outputting data inconsistent with our leading indicators.  The ISM has now fallen below the PMI.

Moreover, two indicators – one with a short lead and one with a long lead – anticipate further declines in the ISM.  The top chart shows the ISM new orders/inventory ratio, which has fallen back to just above 1, and expects a weaker ISM over the next 3 months.  The bottom chart shows a longer-term relationship between US mortgage rates and the ISM.  It expects the ISM to exhibit further weakness over the next year or so.



img2Source: Bloomberg, Macrobond and Variant Perception