Supply chain managers reported lower manufacturing activity in August, though the monthly index released today by the Institute for Supply Management continued to register growth in the sector.
The August PMI was 51.1%, down 1.6 percentage points from the July reading of 52.7%. That was lower than analysts’ consensus forecast of 52.6%. A reading of 50 or more indicates growth in manufacturing.
Comments from respondents reflected “a mix of modest to strong growth depending upon the specific industry, the positive impact of lower raw materials prices, but also a continuing concern over export growth,” said ISM’s Bradley Holcomb.
Foreshadowing continued slowing, the new orders index registered 51.7%, a decrease of 4.8% from the July reading of 56.5%. And the new export orders index registered 46.5%, down 1.5 percentage points from July’s reading of 44%.
Don't expect a "reprieve anytime soon" on exports, said Thomas Feltmate, an economist with TD Economics. "The dollar has recently pulled back against a slew of major currencies but continued to strengthen against many of the EM currencies. At the same time, PMI readings were slightly softer across much of Europe last month, while manufacturing activity in both China and Brazil continued to contract."
Also falling were the production index, down 2.4 percentage points to 53.6, and the employment index, down 1.5 percentage points to 51.2%.
Raw materials prices were lower for the 10th consecutive month, ISM reported, as the prices index dropped 5 percentage points to 39%.
"Taken together, the results of the ISM report suggest that overall manufacturing activity, though not declining, is merely limping along," said Don Norman, director of economic studies at the MAPI Foundation. "Given the headwinds faced by manufacturers—the rise in the value of the dollar, slowing growth in China and a volatile stock market—it may be that slow growth is about the best that can be expected in the near term."
Of the 18 manufacturing industries included in the ISM report, 10 reported growth in August.