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U.S. Manufacturing Sector Contracts for First Time in 3 Years

U.S. manufacturing activities contracted for the first time in three years in August, data released Tuesday by the Institute for Supply Management (ISM) showed.

According to the latest Manufacturing ISM Report on Business, the August, purchasing managers' index (PMI), which gauges the performance of the manufacturing sector, registered 49.1 percent, a decrease of 2.1 percentage point from the July reading of 51.2 percent.

Figures below 50 percent indicate the manufacturing sector is generally contracting. For the past 12 months, the PMI figure averaged at 54.4 percent, the ISM report showed.

"The PMI contracted for the first time since August 2016," said Timothy Fiore, chair of the ISM's Manufacturing Business Survey Committee. He added that the latest figure "ended a 35-month expansion period in which the composite index averaged 56.5 percent."

The protracted global trade tensions and the fear for a recession in the U.S. economy were cited by survey respondents as the main concerns, according to the report.

"While business is strong, there is an undercurrent of fear and alarm regarding the trade wars and a potential recession," said one respondent representing the chemical industry.

In the name of protecting domestic industries, Washington has placed steep tariffs on billions of U.S. dollars' worth of products from China, a heavy blow to the two countries' economic and trade relations.

"Incoming sales seem to be slowing down, and this is usually our busiest season," said another respondent who makes furniture and other products, highlighting concerns "about the economy and tariffs."

Among all the eleven indicators tracked by the ISM, eight illustrated a decrease in growth rates month-on-month, with the sharpest decline occurring in new export orders index, which decreased 4.8 percentage points to 43.3 percent.

Furthermore, the employment index was down 4.3 percentage points to 47.4 percent, the new orders index dropped 3.6 percentage points to 47.2 percent, and the supplier deliveries index dipped 1.9 percentage points to 51.4 percent, according to the report.

The biggest increase occurred in the backlog of orders index, up 3.2 percentage points to 46.3 percent, the fourth consecutive month in which it was below the 50 percent threshold for expansion. Backlog refers to the quantity and money amount of products ordered by customers but are not shipped yet.

The August PMI figure corresponded to a 1.8 percent increase in real gross domestic product on an annualized basis, the report added.

The U.S.-based ISM is a non-profit supply management association providing information and training for professionals and organizations.

(www.chinaview.cn 2019-09-04)