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PMI Contracts for First Time in Five Months

While the manufacturing PMI of 49.4 indicates sector contraction, the overall economy grew for the 87th consecutive month.

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According to the most recent Institute for Supply Management Report on Business, the Purchase Manager’s Index (PMI) was below 50 for the first time since February of this year. Additional findings of the report included:

  • Economic activity in the manufacturing sector contracted in August following five consecutive months of expansion. While the manufacturing PMI of 49.4 indicates contraction, the overall economy grew for the 87th consecutive month.
  • PMI numbers for the year reflect a 2.4 percent increase in GDP.
  • The New Orders Index registered 49.1 percent, a decrease of 7.8 percentage points from July and it lowest total since last December.
  • Only six of 18 industries reported an increase in new orders in August - down from 12 in July. They were Printing & Related Support Activities, Non-metallic Mineral Products, Computer & Electronic Products, Miscellaneous Manufacturing, Food, Beverage & Tobacco Products and Chemical Products.
  • The Production Index registered 49.6 percent, 5.8 percentage points lower than the July reading of 55.4 percent and its lowest mark since August of 2012.
  • The Employment Index registered 48.3 percent, a decrease of 1.1 percent from July and the second consecutive month of contraction.
  • Inventories of raw materials registered 49 percent, a decrease of 0.5 percentage points from July.
  • The Customers’ Inventories Index registered 49.5 percent in August, which is 1.5 percentage points lower than the 51 percent reported in July, indicating that customers’ inventory levels are too low following three consecutive months of being considered too high.
  • The Backlog of Orders Index registered 45.5 percent in August, a decrease of 2.5 percent from July, indicating contraction for the second consecutive month.
  • The Prices Index registered 53 percent, a decrease of two percent, indicating higher raw materials prices for the sixth consecutive month. Specific materials seeing price increases included copper, gold, nickel, plastic resins and stainless steel. Those registering a decrease in price included corn and diesel fuel.

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