Don Norman, Director of Economic Studies at the MAPI Foundation provides his analysis on the Institute for Supply Management’s August Manufacturing Report.
“In yet another disappointing reading on manufacturing activity, The Institute for Supply Management (ISM) reported that its index, a short-term leading indicator of U.S. manufacturing growth, declined from 52.7 in July to 51.7 in August,” noted Don Norman, director of economic studies at the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation. “Because the index is above 50, it shows manufacturing activity expanded in August. Nonetheless, the decline was a surprise in that the index had been expected to come in at 52.6.
“Another sign of weakness in ISM’s August report was the sharp decline in the new orders index which fell from 56.5 in July to just 51.7,” he added. “The production index fell from 56.0 to 53.6. The exports index fell from an already low of 48.0 in July to 46.5, indicating that the decline in exports is worsening. Taken together, the results of the ISM report suggest that overall manufacturing activity, though not declining, is merely limping along. Given the headwinds faced by manufacturers—the rise in the value of the dollar, slowing growth in China, and a volatile stock market—it may be that slow growth is about the best that can be expected in the near term.
“The trend in the ISM index is largely consistent with other readings on manufacturing activity.,” Norman concluded. “As measured by the Federal Reserve Board’s index of manufacturing activity, output has bumped along in 2015, falling in January and February, edging up slightly for the next three months and then falling in June. Then in July manufacturing output increased. The Census Bureau reported that factory orders were up in June, but that increase followed two successive months in which they declined. The overall picture is one of manufacturing activity moving in fits and starts as it expands at a slow—and possibly slowing—rate.”