Manufacturing in the United States continued to slow in August as the ISM’s manufacturing index fell to 49.6. August is the third consecutive month that the ISM index has indicated industry contraction (any reading below 50).
The details from August’s report were disappointing as well. Production dropped off sharply, falling from 51.3 in July to 47.2. New orders also fell by 0.9 points to 47.1. Employment also saw slight declines in August, but remained above its neutral threshold of 50.
Notably, the inventories portion of the index surged in August, rising from 49.0 to 53.0 over the month. This is a bad sign for future growth. The gap between new orders and inventories, a proxy for future growth, surged to -11.3 points in August from just -1.0 point the previous month.
Although August’s report is concerning, the manufacturing PMI remains well above levels signaling a recession. Typically, when the manufacturing PMI falls below a reading of 45 it has meant that the U.S. economy is in or near a recession.
Read the ISM release.