US Factory Activity Shrinks for First Time in 6 Months

The ISM Manufacturing Index was also lower with the Index falling to 49.4 in August from 5-.6 last month. The 50-point mark separates expansion and contraction.

Six industries, including computer and electronic products and miscellaneous manufacturing reported growth in orders, while nine, including wood products and electrical equipment, reported contraction. Auto sales have also levelled off this year after reaching record levels in 2015. Construction spending was flat with total activity accounting for $-,-5′. – billion in July, with no change in spending from June.

Manufacturing unexpectedly hit a rough patch in the USA last month. The ISM’s gauge of factory employment fell to a five-month low of 48.3 from July’s 49.4. “We need to wait and see before drawing any conclusions about what this means for manufacturing for the remainder of the year”. They contrast with manufacturing gauges elsewhere that were a bit more positive on Thursday: A Chinese index rose to the highest level in nearly two years, United Kingdom factories showed resilience after the Brexit vote and a European index indicated expansion.

The index over the past 12 month has averaged a mere 50.2, a figure barely into expansion territory.

A day ahead of the release of the highly anticipated monthly jobs report, the Labor Department released a report on Thursday showing a modest uptick in first-time claims for USA unemployment benefits in the week ended August 27th.

Of the 18 aspects of American manufacturing the index tracks, 11 shrank over the course of August.

This comes in line with Federal Reserve Bank of San Francisco President John Williams’s that the United States economy had settled into a “low-productivity and low-growth” pattern and that central banks needed to look beyond interest rates to find new ways to boost growth. The factory Purchasing Managers’ Index rose to 53.3 from the 41-month low of 48.3 posted in July following the European Union referendum. On a more positive note, a nonmetallic mineral products respondent pointed to continued strong market demand for products related to construction, and food, beverage, and tobacco respondent said that new product distribution is increasing. “The decline in the ISM manufacturing index.is another reason to believe that the Fed will take a cautious approach and delay the next rate hike until December”, said Steve Murphy, U.S. economist at Capital Economics.