The August S&P Global US Manufacturing PMI™ fell to 47.9 in August from 49.6 in July, indicating a modest deterioration in business conditions for a second straight month. The latest reading was just below the forecasted reading of 48.0 and is the index's lowest level of the year.
Here is an excerpt from Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, in the latest press release:
“A further downward lurch in the PMI points to the manufacturing sector acting as an increased drag on the economy midway through the third quarter. Forward looking indicators suggest this drag could intensify in the coming months.
“Slower than expected sales are causing warehouses to fill with unsold stock, and a dearth of new orders
has prompted factories to cut production for the first time since January. Producers are also reducing payroll numbers for the first time this year and buying fewer inputs amid concerns about excess capacity.“The combination of falling orders and rising inventory sends the gloomiest forward-indication of production trends seen for one and a half years, and one of the most worrying signals witnessed since the global financial crisis.
“Although falling demand for raw materials has taken pressure off supply chains, rising wages and high shipping rates continue to be widely reported as factors pushing up input costs, which are now rising at the fastest pace since April of last year.”
Background on the S&P Global US Manufacturing PMI
The S&P Global US Manufacturing PMI™ measures the activity level of purchasing mangers in the manufacturing sector through a questionnaire of ~800 manufacturers. The reported headline number is a weighted average of New Orders, Output, Employment, Suppliers' Delivery Time, and Stocks of Purchases. The S&P Manufacturing PMI is a diffusion index, meaning that a reading above 50 indicates expansion in the sector and a reading below 50 indicates contraction.
