The Chicago PMI dropped to 52.7 in May. This reading has dropped over the last three months. The index is at its lowest level since September 2009.
Readings above 50 suggest the economy is still expanding. However, as a general rule three straight monthly declines directly correspond to the onset of each of the last seven national recessions. This correlation usually translates into a recession within the next six-to-eight months.
This index is one of several indicators that have come out this month that shows a slowdown, predicts recessionary times. A recession will slow demand and cause contractions. This ultimately leads to loss of purchasing power over time, decreased spending. The likely result will be more printing or other government intervention. Meaning they are not going to get the deficit under control and there is a good chance of pushing more cheap money into the system.
Most investors will hedge against inflationary pressures and the market risk with hard assets such as precious metals. So, those of with a self directed IRA should check your allocations of metals. Those of you without a self directed IRA — Get One Today!