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.”