ISM Manufacturing Index (Sep.)

The slump in the ISM manufacturing index to a decade low of 47.8 in September, from 49.1, will reignite fears that the US economy is headed for a recession. Our guess is that this deterioration is at least partly due to the strike at General Motors, which began in mid-September. Nevertheless, it also reflects the weakness of global conditions and reinforces our belief that, despite the hawkish protestations of some officials in recent days, the Fed will still cut interest rates by a further 25bp at December’s FOMC meeting.