The Institute for Supply Management’s index dropped to 49.4, weaker than the most pessimistic estimate in a Bloomberg survey, from 52.6 in July, figures from the Tempe, Arizona-based group showed Thursday. The August PMI was 49.4 percent, a decrease of 3.2 percentage points from the July reading.
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US manufacturing contracted in August for the first time since February, as new orders and output plummeted and factories cut jobs, according to information released Thursday by the Institute for Supply Management. And a gauge of production plunged to the lowest level in four years.
The unexpected fall indicated that some of the first-half weakness in the USA economy spilled over into the third quarter, and that manufacturers continue to struggle with the weak global economy and the strong dollar’s impact on exports. “It’s not as if the clouds over the outlook have lifted to give us more clarity on the USA and global demand”.
Only six of 18 industries reported growth in the period, including printing, computers, food and beverage and chemical products.
USA manufacturing had shown signs of pulling out of an 18-month slump, but Friday’s report indicates that challenges remain. This was the first contraction since February 2016 and the lowest reading since January.
The euro jumped higher against the U.S. dollar after the ISM manufacturing report unexpectedly showed manufacturing activity falling into contraction territory in August.
Less demand means producers have little reason to hire.
The employment index remained below the 50.0 level at 48.3 from 49.4 with inventories also declining for the month, while the supplier deliveries index was at 50.9 from 51.8 previously. The measure has shown contraction in all but one month this year. There were also reports of difficulties in recruiting staff.
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Still, the magnitude of the decline surprised many economists, since other recent measures of factory output, including surveys of manufacturers in the Philadephia region, improved this month.
