EmailThe ISM Manufacturing Index remained above the expansion/contraction threshold in August as the index fell from 50.9 in July to 50.6. The Briefing.com consensus expected the ISM Index to enter a contraction phase and fall to 48.5.
With the notable exception of the August Chicago PMI, all of the regional manufacturing surveys either entered or remained in contraction in August. This included the weakest Philadelphia Fed Business Outlook (-30.7) since March 2009 and the lowest Richmond Fed Fifth District Survey of Manufacturing (-10) since June 2009. The fact that the ISM was in complete contrast to the regional data suggests the result may be an unreliable predictor of industrial production and orders in August. The underlying details of the report were mixed but leaned toward the downside.
New orders strengthened as the index increased from 49.2 in July to 49.6, but remained in contraction. Order backlogs contracted for the third consecutive month, but the index strengthened from 45.0 to 46.0. Given the contraction in overall orders, it is no surprise that production entered a contraction phase for the first time since May 2009 as the corresponding index fell from 52.3 in July to 48.6 in August. The lack of orders suggests production growth will contract again in September.
Even though production slowed, employment growth remained positive as the index fell from 53.5 in July to 51.8 in August. The index for inventories increased from 49.3 in July to 52.3.
