Manufacturing Struggles for Third Straight Month

Economic activity in the manufacturing sector contracted in August for the third time since July 2009; however, the overall economy grew for the 39th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

"The PMI™ registered 49.6 percent, a decrease of 0.2 percentage point from July's reading of 49.8 percent, indicating contraction in the manufacturing sector for the third consecutive month,” said Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “This is also the lowest reading for the PMI since July 2009. The New Orders Index registered 47.1 percent, a decrease of 0.9 percentage point from July, indicating contraction in new orders for the third consecutive month. The Production Index registered 47.2 percent, a decrease of 4.1 percentage points and indicating contraction in production for the first time since May 2009. The Employment Index remained in growth territory at 51.6 percent, but registered its lowest reading since November 2009 when the Employment Index registered 51 percent. The Prices Index increased 14.5 percentage points from its July reading to 54 percent. Comments from the panel generally reflect a slowdown in orders and demand, with continuing concern over the uncertain state of global economies."

Of the 18 manufacturing industries, eight are reporting growth in August in the following order: Printing & Related Support Activities; Primary Metals; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Paper Products; Chemical Products; and Miscellaneous Manufacturing. The eight industries reporting contraction in August — listed in order — are: Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; and Machinery.

Here’s a sampling of industry reactions:

"Internal indicators and feedback from sales channels are indicating a slowdown in demand for capital equipment." (Machinery)

"Business continues to be very solid, but there is now a slowing of incoming orders." (Fabricated Metal Products)

"Incoming orders have slowed somewhat, but indications are that there will be a stronger fourth quarter." (Plastics & Rubber Products)

"Business is slow right now. Companies seem to be holding onto their money." (Computer & Electronic Products)

"We can sense, feel and see headwinds with customer orders, especially Europe related." (Apparel, Leather & Allied Products)

"New orders and backlog remain flat." (Miscellaneous Manufacturing)

"Auto industry slowing a bit in the second half [of the year]." (Transportation Equipment)

"U.S. drought severely impacting raw materials prices." (Food, Beverage & Tobacco Products)

"Lackluster demand continues in all regions of the world, and is supporting much lower raw materials prices in the second half of 2012." (Chemical Products)

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