At 51.1% the August PMI came in below the anticipated value of 52.8%.
The numbers indicate growth, but the change indicates that in the manufacturing sector growth is slowing, and new orders and exports in particular are vulnerable. This was the 32nd consecutive month of growth of manufacturing, and the 75th consecutive month of expansion in the broad economy.
“The August PMI® registered 51.1 percent, a decrease of 1.6 percentage points from the July reading of 52.7 percent. The New Orders Index registered 51.7 percent, a decrease of 4.8 percentage points from the reading of 56.5 percent in July. The Production Index registered 53.6 percent, 2.4 percentage points below the July reading of 56 percent. The Employment Index registered 51.2 percent, 1.5 percentage points below the July reading of 52.7 percent. Inventories of raw materials registered 48.5 percent, a decrease of 1 percentage point from the July reading of 49.5 percent. The Prices Index registered 39 percent, down 5 percentage points from the July reading of 44 percent, indicating lower raw materials prices for the 10th consecutive month. The New Export Orders Index registered 46.5 percent, down 1.5 percentage points from the July reading of 48 percent.”- Bradley J Holcomb, Chair, Institute for Supply Management, August Report on PMI.
Generally speaking, values above 50 percent correlate with a growing manufacturing sector.
In the August report, Miscellaneous Manufacturing; Fabricated Metal Products; Plastics & Rubber Products; and Machinery Markets showed growth, while Primary Metals; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Computer & Electronic Products; and Transportation Equipment all showed declines.
The Prices index (reflecting raw material prices)was down five percentage points from July to come in at 39 percent. Normally this would be good news for manufacturers, but is actually reflective of a weakness in demand for products worldwide.
Business Insider reports that two PMI indicators from China also fell in August: China’s official manufacturing purchasing managers index (PMI) fell to a three-year low of 49.7 in August from 50.0 in July. The unofficial Caixin-Markit manufacturing PMI slipped to 47.3 in August from 47.8 in July. Any reading below 50 signals contraction. Business Insider
Graph courtesy Calculated Risk Blog