The manufacturing sector contracted in August following five consecutive months of expansion, while the overall economy grew for the 87th consecutive month, according to supply executives in the latest Manufacturing ISM Report on Business.
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Economists surveyed by The Wall Street Journal had expected an August reading of 52.0. Any reading below 50 signals contraction.
There is slight disagreement when it comes to the health of the nation’s manufacturing industry in the wake of two reports issued on Thursday, but not when it comes to what pulled two gauges lower for August.
Only six of 18 industries reported growth in the period, including printing, computers, food and beverage and chemical products. “It was a hot month, with unfortunate flooding in Louisiana, but things do not suggest that this would continue, rather I think there is every reason to believe we will get back on track after the August blip”. They contrast with manufacturing gauges elsewhere that were a bit more positive on Thursday: A Chinese index rose to the highest level in nearly two years, United Kingdom factories showed resilience after the Brexit vote and a European index indicated expansion.
Chris Low, chief economist at FTN Financial in NY, had this takeaway: “The good news is that it is not worse”. New Export Orders remained steady in the “growing” category at 52.5% for August, unchanged from July.
At the margin, there will fresh doubts surrounding a Fed rate increase, although the December 2015 rate increase came when the ISM manufacturing index was in contraction territory.
The US dollar lost some 0.30% against the euro to $1.1190 after the ISM manufacturing report was published during the US trading session.
With the 12-month PMI average at 50.2, Holcomb said things have been moving upward; albeit not at a robust rate that has been seen in prior years, calling the last 12 months more of a “plow horse” manufacturing economy and the over all economy, too.
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The New Orders Index registered 49.1%, a decrease of 7.8 percentage points from the July reading of 56.9%. It surveys about 200 manufacturers every month.
