The manufacturing ISM is an indicator of activity, widely used to anticipate the behaviour of the economy. When it is above 50 it indicates that we are in an area of economic expansion, while if it is below that level it points towards increasing risks that a period of economic contraction may occur. In the latest figures, for August, the index stood at 49, fuelling fears that we are on the brink of a new economic crisis.

The recent publication of worse-than-expected U.S. manufacturing activity data has fuelled fears of a major economic slowdown in the world’s largest economy.

In addition, according to the New York Federal Reserve’s index, the probability of a recession occurring at some time during the next 12 months has strongly increased and already stands at 37.9%.

The warning signs come not only from the United States but also from the many other regions where leading indicators are at alert levels. Some countries have even seen a huge fall in their growth rates, which are close to entering negative territory.

The rise in trade tensions under the Trump administration, along with the political instability in certain countries, are also not helping investor confidence and could explain a large part of the fall in activity indicators, as is shown by the poor international trade figures.

Although it seems clear that the risks have increased significantly, and that it is necessary to pay a great deal of attention to changes in the various economic variables and to become increasingly cautious, we also think it is important to highlight a number of, for us, key aspects.

Good news.

Firstly, the last two times that manufacturing activity indicators gave economic warning signs (2012-2013 and 2015-2016), the U.S. economy did not go into recession.

Secondly, the developed regions are becoming increasingly less dependent on the manufacturing sector (which is being worse hit), and more so on the services sector (which continues to offer positive data).

Finally, it should be pointed out that some variables that themselves anticipate the leading activity indicators, such as credit developments in China or certain U.S. regional indices, hint at a possible improvement over the coming months.