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Financial News: U.S. Manufacturing Activity Contracts For First Time In

U.S. Manufacturing Activity Contracts For First Time In Three Years

09/03/2019 - 10:21:00 (RTTNews)

(RTTNews) - U.S. manufacturing activity contracted for the first time in three years in the month of August, according to a report released by the Institute for Supply Management on Tuesday.

The ISM said its purchasing managers index fell to 49.1 in August after dipping to 51.2 in July, with a reading below 50 indicating a contraction in manufacturing activity. Economists had expected the index to edge down to 51.0.

With the bigger than expected decrease, the PMI dropped below 50 for the first time since August of 2016 and hit its lowest level since January of 2016.

"Comments from the panel reflect a notable decrease in business confidence," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

He added, "August saw the end of the PMI expansion that spanned 35 months, with steady expansion softening over the last four months."

The drop by the headline index came as customer demand contracted for the first time since December of 2015, with the new orders index sliding to 47.2 in August from 50.8 in July.

The report also showed an end to a 35-month expansion in production, as the production index dipped to 49.5 in August from 50.8 in July.

Employment in the manufacturing sector also contracted for the first time since September of 2016, with the employment index slumping to 47.4 in August from 51.7 in the previous month.

The new export orders index experienced the biggest loss among the subindexes, tumbling to 43.3 in August from 48.1 in July.

"Respondents expressed slightly more concern about U.S.-China trade turbulence, but trade remains the most significant issue, indicated by the strong contraction in new export orders," said Fiore.

"Respondents continued to note supply chain adjustments as a result of moving manufacturing from China," he added. "Overall, sentiment this month declined and reached its lowest level in 2019."

On the inflation front, the prices index inched up to 46.0 in August from 45.1 in July, although the reading below 50 still indicates prices contracted for the third straight month.

The ISM is scheduled to release a separate report on service sector activity in the month of August on Thursday. The index of activity in the sector is expected to tick up to 53.9 in August from 53.7 in July.

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