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Notes to myself, possibly of interest to others.
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Monday, October 4, 2010

Rosenberg Daily - Orders to inventories presage another recession

What is critical here is the orders-to-inventories ratio, which leads the headline ISM by roughly three months and strongly suggests that we will be sub-50 and as such ‘double dip’ talk will re-emerge before the end of the year. See what this ratio has done in recent months:
  • May: 1.44x
  • June: 1.28x
  • July: 1.07x
  • August: 1.03x
  • September: 0.98x
Ouch! Detect a pattern here, folks? The orders-to-inventory ratio is all the way back to January 2009 levels, when the economy was knee-deep in recession. All we can tell you is what the historical record says — at this level in the past, the economy slipped into contraction 75% of the time.

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