Economic Watch: New Manufacturing Orders Stagger, Construction Up
There is slight disagreement when it comes to the health of the nation’s manufacturing industry in the wake of two reports issued on Thursday, but not when it comes to what pulled two gauges lower for August.
According to the monthly survey of purchasing managers by the Institute for Supply Management (ISM), economic activity in the sector contracted in August following five months of growth. Its Purchasing Managers Index (PMI) registered 49.4%, a decrease of 3.2 percentage points from the July reading of 52.6% with the latest performance coming in far worse than Wall Street expectations.
A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% is a sign it’s generally contracting, according to the industry group.
Only six of the 18 manufacturing industries reported an increase in new orders in August, down from 12 in July, while only eight of the 18 reported an increase in August production, down from nine in July.
“The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (50.9%) corresponds to a 2.4% increase in real gross domestic product (GDP) on an annualized basis,” said Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee. “In addition, if the PMI for August is annualized, it corresponds to a 2% increase in real GDP annually.”
For comparison, the nation’s GDP expanded at a revised annual rate of just 1.1% in the second quarter of the year.
According to the survey, the New Orders Index registered 49.1%, a decrease of 7.8 percentage points from the July reading of 56.9%. The Production Index registered 49.6%, 5.8 percentage points lower than the July reading of 55.4%. The Employment Index registered 48.3%, a decrease of 1.1 percentage points from the July reading of 49.4%.
The drop in new orders is the first …Read the rest of this story
