The mixed message in the ISM data of growing overall economy and contracting manufacturing isn’t difficult to fathom- slowdown in manufacturing as orders and demand dry up as global economic uncertainty continues to reduce confidence.
YELLOW FLAG FOR MANUFACTURING!
Economic activity in the manufacturing sector contracted in August for the third time since July 2009; however, the overall economy grew for the 39th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.
“The PMI™ registered 49.6 percent, a decrease of 0.2 percentage point from July’s reading of 49.8 percent, indicating contraction in the manufacturing sector for the third consecutive month.
(This is also the lowest reading for the PMI™ since July 2009.)
Manufacturing contracted in August as the PMI™ registered 49.6 percent, a decrease of 0.2 percentage point when compared to July’s reading of 49.8 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
What this really means: ” A PMI™ in excess of 42.6 percent, over a period of time, generally indicates an expansion of the overall economy.”
Therefore, the August PMI™ indicates growth for the 39th consecutive month in the overall economy, but indicates contraction in the manufacturing sector for the third time since July 2009, when the PMI™ registered 49.2 percent.
Other indicators:
- New Orders Index registered 47.1 percent, a decrease of 0.9 percentage point from July, indicating contraction in new orders for the third consecutive month.
- Production Index registered 47.2 percent, a decrease of 4.1 percentage points and indicating contraction in production for the first time since May 2009.
- Employment Index remained in growth territory at 51.6 percent, but registered its lowest reading since November 2009 when the Employment Index registered 51 percent.
- Prices Index increased 14.5 percentage points from its July reading to 54 percent.
The mixed message in these data isn’t difficult to fathom- slowdown in manufacturing as orders and demand dry up as global economic uncertainty continues to reduce confidence.
See the full ISM report for August here