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Economic news
03.09.2024

U.S. manufacturing activity continues to shrink in August albeit at a weaker pace - ISM

A report from the Institute for Supply Management (ISM) revealed on Tuesday the U.S. manufacturing sector’s activity shrank again in August albeit at a slightly slower pace than in the previous month.

The ISM's index of manufacturing activity - the manufacturing PMI - checked in at 47.2 per cent in August, up 0.4 percentage point from an unrevised July reading of 46.8 per cent. Though the August reading pointed to the contraction in the U.S. factory sector for the fifth straight month, its gain compared to July marked the first positive change in the index since March. 

Economists had forecast the indicator to rise to 47.5 per cent.

According to the report, the New Orders Index dropped 2.8 percentage points to 44.6 per cent last month, remaining in contraction territory for the fifth consecutive month. In addition, the Production Index decreased 1.1 percentage points to 44.8 per cent, staying in contraction territory for the third straight month. The Supplier Deliveries Index fell 2.1 percentage points to 50.5 per cent, marking the second month of slower deliveries after four consecutive months of quicker deliveries. Meanwhile, the Employment Index jumped 2.6 percentage points to 46.0 per cent, indicating that employment shrank in August for the third month in a row. The Inventories Index surged 5.8 percentage points to 50.3 per cent, suggesting manufacturing inventories returned into expansion territory last month. On the price front, the Prices Index went up 1.1 percentage points to 54.0 per cent, indicating raw materials prices increased in August for the eighth month after eight straight months of declines.

Commenting on the August data, Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that demand remained subdued, as companies showed the unwillingness to invest in capital and inventory due to current federal monetary policy and election uncertainty. “Production execution was down compared to July, putting additional pressure on profitability,” he added. “Suppliers continue to have capacity, with lead times improving and shortages not as severe.”

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