Manufacturing sector contracts again in August

Manufacturing sector contracts again in August

PMI falls for third straight month and hits lowest reading since July ’09; production index falls for the first time in more than three years

Economic activity in the U.S. manufacturing sector fell for the third consecutive month in August and marked its lowest reading since July of 2009, according to the Institute for Supply Management’s August Report on Business, issued today.

ISM’s Purchasing Manager’s Index registered 49.6, down 0.2 percentage points compared to July. New orders fell for the third straight month as well, declining nearly 1% to 47. A reading below 50 indicates contraction.

Of particular note this month was the decline in ISM’s Production Index—its first drop since May 2009. The index fell 4% to 47. Purchasing managers reported higher prices during the month as well, as the Prices Index grew 15% to 54.

Despite the drops, the overall economy grew for the 39th straight month, though at a slower rate. ISM’s Employment Index also continued to grow in August, although it registered its lowest reading since November 2009.

“… Comments from the panel [of purchasing and supply executives] generally reflect a slowdown in orders and demand, with continuing concern over the uncertain state of global economies,” Bradley J. Holcomb, chairman of ISM’s Manufacturing Business Survey Committee, said in announcing the results September 4.

This month’s PMI report follows other disappointing news in August, particularly in the electronics supply chain. Industry analyst IHS announced mid-month that it was downgrading its outlook for the global semiconductor market, predicting that revenue in the sector will decline this year for the first time since the 2009 recession. Although the decline will be slight—0.1%--it represents a turnaround from the company’s previous estimate of 3% growth in the global semiconductor market this year.

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