US economy flashes warning signs of impending slowdown: Kemp

Oil prices and calendar spreads have been falling since October, as traders anticipate weaker consumption growth in 2019.

US manufacturers reported the broadest slowdown in growth last month for more than a decade, as the trade conflict with China, falling equity prices and increasing uncertainty finally started to take a toll on the economy.

The Institute for Supply Management’s purchasing managers’ index slumped by 5.2 points in December from the previous month, the largest monthly fall since October 2008. Manufacturers reported increases in orders, output, employment and inventories, indicating the sector continues to expand, but at a much slower rate than before, according to survey results published on Thursday.

The new orders component slumped by 11 points and remained barely above the 50-point threshold that divides expanding activity from a contraction, suggesting the loss of momentum could extend into early 2019.

Major US equity indices have been trending lower for months, suggesting investors were anxious about the earnings outlook, even as the purchasing managers survey continued to point to strong expansion. That contradiction has now been resolved – with the decline in the survey results confirming the signal coming from the equity markets.