A key index from the manufacturing industry shows, ahem, unexpectedly poor performance in the just-concluded month of  July.  The Institute for Supply Management scored July as the slowest month in two years, and predicts that we will remain “mired” in stagnation through the end of the year.  As usual, this takes Reuters by surprise:

Manufacturing grew at its slowest pace in two years in July as new orders contracted, a troubling development for the faltering economy.

The Institute for Supply Management said on Monday its index of national factory activity fell to 50.9, the lowest level since July 2009, from 55.3 in June.

Economists had expected a reading of 54.9. A reading below 50 indicates contraction in manufacturing. …

“These are the types of numbers that are consistent with what we saw with the GDP numbers,” said Keith Hembre, chief economist at Nuveen Asset Management in Minneapolis.

“Absent a governmental shock, we would dredge forward with this stagnant economic performance. We’ll be mired in this 1 to 2 percent (growth) environment we have been in.”

“Government shock” means another stimulus package, of course.  However, given the poor growth produced by the last massive government “shock,” we’d likely end up with growth no more than 2-3% in the same period, which would dissipate as rapidly as the artificial bounce provided by Porkulus.  Besides, as the debt deal demonstrates, there is no more appetite for handing the Obama administration a blank check in the name of Keynesian stimulus, mainly because of the utter failure of the policy the first time around.

Reuters also has a companion piece detailing the reaction of economists to the news.  It ranges from “a pretty good miss to the downside” to “pretty terrible, disappointing.”  What I’m wondering is why anyone would have been surprised.   Orders for durable goods dropped significantly last month, and in two of the last three months.  Even with those declines, inventories continue to grow past previous record levels.  It would be a much bigger surprise if the ISM index had shifted upward, and in fact it might be good news that the ISM index stayed above 50.

The bottom line: Keynesian stimulus combined with massive and arbitrary regulatory expansion doesn’t create economic growth.  Now that we’ve relearned the lessons of the 1970s, can we start applying the solutions of the 1980s?

Note: I am on vacation today and tomorrow at a cabin where Internet access is spotty at best.  I’m writing this at a local restaurant.