The ISM manufacturing index fell from 52.7 percent in July to 51.1 percent in August. This is the lowest reading for the index since May 2013, but it remained above the 50 level that indicates expansion in manufacturing. The consensus was for a small increase in the index in August.
Four of the five subcomponents used to compute the overall index fell in August, with an especially large drop in new orders, although it remained above 50. The production component fell from 56.0 percent to 53.6 percent and the employment component fell from 52.7 percent to 51.2 percent. Inventories fell one point to 48.5 percent. The supplier deliveries component was up over the month, and moved from below 50 to above.
One concerning point was that the customer inventories index rose from 44.0 percent to 53.0 percent, indicating that they are too high. This could be a drag on manufacturing in the near term.
Of the 18 manufacturing industries covered in the report, 10 reported growth in August, with the biggest improvements in textile mills, furniture, and paper products. Six industries reported contraction, with the biggest decline in apparel; primary metals; and electrical equipment, appliances and components. In the comments, respondents noted a price drop for commodities used as inputs and weakness overseas, in part because of the stronger dollar.