ISM Reports Manufacturing Sector Declining Slightly

Sept. 2, 2008
However foreign trade is still a bright spot

Economic activity in the manufacturing sector failed to grow in August, while the overall economy grew for the 82nd consecutive month, according to report released by the Institute for Supply Management (ISM) on Sept. 2.

Manufacturing contracted in August as the PMI registered 49.9%, 0.1 percentage point lower than the 50% reported in July. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

"The PMI indicates a slight decline in manufacturing during August. This continues the 2008 trend toward negligible growth or contraction each month, but ultimately results in very little overall change in the sector. This month's report is showing the first signs of lower prices as the Prices Index fell significantly, though still at an inflationary level. Export orders picked up additional momentum, and that is important to manufacturers as domestic demand remains soft for most industries," said Norbert J. Ore, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee.

However, Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI sees some good news in the report. "Foreign trade continues to be the bright spot in business activity as exports grow and imports contract. The weak dollar makes U.S. products very competitive internationally at the same time that an income and credit constrained consumer is buying few discretionary items. Fortunately for domestic producers, consumer discretionary items tend to have a high import share. It is capital goods production, including high tech, that is allowing manufacturing to limp along and not experience a major bust."

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