Economic Growth Slows In August

Economic activity in the manufacturing sector expanded in August for the 25th consecutive month, and the overall economy grew for the 27th consecutive month, reports the Institute for Supply Management, but the PMI of 50.6 percent was down 0.3 percent from July, indicating that the rate of growth was slightly slower. Any reading above 50 percent indicates growth.

The latest Manufacturing Report On Business from the Tempe, Ariz.-based ISM also saw a Production Index of 48.6 percent, indicating contraction for the first time since May 2009, when it registered 45 percent. The New Orders and Backlog of Orders Indexes, while up slightly from July, both remain below 50 percent, indicating contraction. The rate of increase in prices slowed for the fourth consecutive month, dropping another 3.5 percentage points in August to 55.5 percent.

“The overall sentiment is one of concern and caution over the domestic and international economic environment, which is affecting customers’ confidence and willingness to place orders, at least in the short term,” says Bradley Holcomb, chairman of ISM’s Manufacturing Business Survey Committee.

Of the 18 manufacturing industries surveyed, 10 reported growth in August, including fabricated metal products and miscellaneous manufacturing. Primary metals was among six industries reporting contraction.

“The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (56.8 percent) corresponds to a 5 percent increase in real gross domestic product. In addition, if the PMI for August is annualized, it corresponds to a 2.8 percent increase in real GDP annually,” Holcomb adds.

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Tuesday, September 27, 2016