PMI Worries, Puerto Rico’s Turnaround, and Social Impact Bonds


  • Cause for Pessim-ISM?
  • Puerto Rico Digs Out
  • Investing for Social Impact

The fourth-quarter holiday seasons have expanded to unacceptable lengths. I noticed Halloween candy for sale in August, Thanksgiving cards out in September, and Christmas decorations on the shelves…virtually year-round. I realize the commercial aspects of these occasions have taken on increasing prominence, but I would support legislation that establishes firm timelines separating them.

However premature, the appearance of harvest-related items generally marks a turning point in the calendar. Conditions are cooling in Northern climes, and preparations are being made for chillier times ahead. The same might be said for the American economy; growth is cooling, and analysts are wondering whether a deeper chill lies ahead. Signals that gauge the temperature of business activity are receiving increased scrutiny.

Prominent among the potential leading indicators is the purchasing managers’ index (PMI) compiled by the Institute for Supply Management (ISM) and the Markit Group. PMIs are assembled for manufacturing and services across 50 countries and regions, representing a broad range of industries. PMIs have a reputation as foreshadowers of economic activity, and also have the quality, rare in economics, of being easy to explain. When the reading is above 50, expansion is expected. Below 50, contraction is likely.

WEC 10/11/19 Chart 1

During the course of the past year, manufacturing PMIs for the world’s major centers have trended downward. All now stand below 50, some substantially so. The tightening of trade terms around the globe and the uncertainty surrounding trade negotiations are the main reasons for the spreading malaise. Negotiators for China and the United States resumed talks this week in Washington, but the two sides seem very far apart.