Manufacturing Sector Continues to Grow

Tempe, Ariz.— Showing modest signs of strain as gas prices rise and inventories start to build — both suppliers' and their customers' — the nation's manufacturing sector continued to grow during August, albeit at a somewhat slower pace, according to the latest monthly canvass of the nation's purchasing managers.

The Institute for Supply Management (ISM) said its widely watched gauge of U.S. manufacturing declined by 3 full percentage points in August, to a current level of 59 — indicating slowing growth in a major engine of the American economy. A reading over the benchmark level of 50 indicates growth, while anything beneath points to contraction.

“The rate of growth in the manufacturing sector decelerated during August, but overall the sector is still quite positive as both new orders and production remain at high levels,” said Norbert Nore, chair of the ISM's manufacturing business survey committee. Still, said Nore, the dip in the August index to a level of 59 “represents the end of a period of nine consecutive months” when the Purchasing Managers' Index was at 60 percent or higher.

Acting as a drag in August were declines in the rate of growth for new orders, down 3.5 percentage points; production, down 6.6 percentage points; employment, off 1.6 percentage points; order backlogs, down 3 percentage points; and export orders, down 2 percentage points.

And the three key areas in which the numbers did rise during August are not necessarily positive indicators: raw materials prices, which climbed by 4.5 percentage points; manufacturer inventories, which rose by 1.8 percentage points; and customers' inventories, which jumped by 8 percentage points.