August 2019 Manufacturing ISM Report On Business Reports an End to 35-Month Expansion Period

By Steve Clouther

Industry Trends

The Manufacturing ISM Report On Business is published monthly by the Institute for Supply Management (ISM), the largest supply management organization in the world, as well as one of the most respected.  Economic activity in the manufacturing sector contracted in August, and the overall economy grew for the 124th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

Manufacturing contracted in August, as the PMI registered 49.1 percent, a decrease of 2.1 percentage points from the July reading of 51.2 percent.  This is the lowest reading since January 2016, when the index registered 48 percent.  The PMI contracted for the first time since August 2016 (when it registered 49.6 percent) and ended a 35-month expansion period in which the composite index averaged 56.5 percent.  The August contraction ended four straight months of expansion softening.

ISM's New Orders Index registered 47.2 percent in August, a decrease of 3.6 percentage points when compared to the 50.8 percent reported for July. This indicates that new orders contracted after growing for one month.

ISM's Production Index registered 49.5 percent in August, which is a decrease of 1.3 percentage points when compared to the 50.8 percent reported for July, indicating contraction after growth for 35 consecutive months.

ISM's Employment Index registered 47.4 percent in August, a decrease of 4.3 percentage points when compared to the July reading of 51.7 percent.  This indicates contraction in August after 34 consecutive months of employment growth.

The delivery performance of suppliers to manufacturing organizations slowed in August, as the Supplier Deliveries Index registered 51.4 percent.  This is 1.9 percentage points lower than the 53.3 percent reported for July and is the 42nd straight month of slowing supplier deliveries.

The Inventories Index registered 49.9 percent in August, an increase of 0.4 percentage point from the 49.5 percent reported for July, a contraction for the third straight month.

ISM's Backlog of Orders Index registered 46.3 percent in August, which is 3.2 percentage points higher than the 43.1 percent reported in July, indicating order backlogs contracted for a fourth consecutive month, but at a slower rate in August.

Of the 18 manufacturing industries, nine reported growth in August, in the following order: Textile Mills; Furniture & Related Products; Food, Beverage & Tobacco Products; Wood Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Machinery; Miscellaneous Manufacturing; and Chemical Products.  The seven industries reporting contraction in August — in the following order — are: Apparel, Leather & Allied Products; Fabricated Metal Products; Transportation Equipment; Primary Metals; Plastics & Rubber Products; Paper Products; and Electrical Equipment, Appliances & Components.

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