ISM Manufacturing Index falls to lowest level in almost two years

Blame supply issues caused by the earthquake in Japan or the overall slowing in the U.S. recovery, but the closely-followed ISM Manufacturing Index fell a much larger-than forecast 6.9 points to 53.5, the lowest reading since September 2009 and confirming recent sluggishness in regional surveys.

A level above 50 suggests that manufacturing is expanding.



New orders, production and exports slowed significantly, signaling that further cooling is likely in the short-term, but the survey revealed that most manufacturers still believe that customer inventories are too low, mitigating some of the negativity from the report.

Prices paid did ease some, falling from 85.5 to a still-high 76.5.

Nonetheless, the larger-than-forecast slowdown in manufacturing is the latest piece of data to signal a continuation in the recent softness in economic activity.

Weekly jobless claims have been above 400,000 since early April, GDP growth in Q1 slowed to 1.8%, housing has been muddling along, and ADP said this morning that the economy created only 38,000 jobs in the private sector.

Now, manufacturing, which has been the lone bright spot in an otherwise dull economic outlook, is cooling, as Japanese supply-chain issues ripple across the Pacific. Wish there was better news to report this morning, but problems in Japan are likely to be temporary as rebuilding efforts gather steam later in the year.