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ISM Manufacturing: Sharp Decline, Contracts for 1st time since Feb

September 1, 2016
Bottom Line: Manufacturing activity contracted in August with a sharp decline in new orders. The differential between new orders and inventory levels declined, suggesting manufacturing activity levels may continue to contract over the coming months. Employment in the manufacturing sector fell, and was slightly below the average survey level for the last twelve months. Prices paid, declined from 55.0% to 53.0% this month indicating a decline in the price of raw materials. All that said, the comments from purchasing managers cited in this report sounded a touch less negative. Many comments were along the lines of this from a chemical products manager - "We have been getting lots of inquiries, but not a lot of sales order placements." Others noted that business was generally flat on the month.

The ISM Manufacturing Index FELL by 3.2 points in August to 49.4%, compared with market expectations for a smaller decline to a 52.0%. This indicates that manufacturing activity contracted moderately during the month.

New Orders declined sharply from 56.9% to 49.1%. Meanwhile, Export Orders were unchanged slightly. Production declined sharply from 55.4% to 49.6%. Consequently, Order Backlogs declined sharply. Inventories declined slightly from 49.5% to 49.0%. They are modestly above the average survey level for the last twelve months. Employment declined modestly from 49.4% to 48.3%, suggesting there will be modest factory job creation in the upcoming payroll employment report. Prices declined modestly.
Article by contingentmacro