U.S. Manufacturing Shrinks


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American manufacturing activity contracted in August for the first time in three years, amid concerns of a slowdown in manufacturing and economic activity in the U.S. and beyond.  The closely watched PMI from the Institute for Supply Management (ISM) fell to 49.1 in August, a decrease of 2.1 points, signaling contraction in the U.S. manufacturing sector for the first time since 2016 (a reading above 50.0 indicates expansion).  The PMI has now fallen for the last five months.

According to the ISM, “…trade remains the most significant issue, indicated by the strong contraction in new export orders.”  New Export Orders fell to their lowest level in over ten years, dropping 4.8 points to 43.3 from July’s 48.1 reading.  Imports also continued to shrink, falling 1.0 point to 46.0.  Every other PMI component—New Orders, Production, Employment, Inventories, Customers’ Inventories, Prices, Backlog of Orders—also fell below 50.0 signaling contraction in August, with the sole exception of Supplier Deliveries which register 51.4, a decrease of 1.9 points from July.

Many ISM Survey respondents mentioned trade and tariffs in their comments:

  • ”…Tariffs continue to be a strain on the supply chain and the economy overall.”
    (Computer & Electronic Products)
  • “…there is an undercurrent of fear and alarm regarding the trade wars and a potential recession.” (Chemical Products)
  • “…Concerns about the economy and tariffs.” (Furniture & Related Products)
  • “Business is starting to show signs of a broad slowdown.” (Machinery)