ISM Manufacturing Index Contracts for 5th Consecutive Month

Fiore continues: “While still in contraction territory, US manufacturing activity contracted more slowly than last month. Demand continues to be weak, output has declined and inputs have remained accommodative. application the slowdown was reflected by (1) the New Orders Index falling further into contraction, (2) the Export New Orders Index contracting slightly faster, (3) the Backlogged Orders Index remaining in strong contraction territory, and (4) Index of customer inventories at the “correct” level. (For more, see the Customer Inventory Index summary below.) Exit (as measured by indices of output and employment) continued to contract moderately, with output falling further while employment contracted more slowly than in July. The panelists’ companies reduced production levels month-over-month as job cuts continued in August. inputs – defined as supplier deliveries, inventories, prices and imports – generally continued to adjust to future demand growth, with inventory growth attributed to a mismatch between supply and demand.

“Demand remains subdued as companies show reluctance to invest in capital and inventory due to current federal monetary policy and election uncertainty. Manufacturing execution fell compared to July, putting further pressure on profitability. Suppliers continue to have capacity, delivery times are improving and shortages are not as severe. Sixty-five percent of manufacturing gross domestic product (GDP) contracted in August, down from 86 percent in July. The share of GDP of the manufacturing sector registering a composite PMI^® the count at or below 45 percent (a good barometer of global manufacturing weakness) was 33 percent in August, a 20 percentage point improvement from the 53 percent reported in July. Two of the six largest manufacturing industries – Food, Beverage and Tobacco; and Computer & Electronic Products – expanded in August compared to none in July,” says Fiore.