Manufacturing slump weighs on US recovery

Ben Southwood
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US MANUFACTURING’S performance worsened in August, according to two prominent surveys of the sector released yesterday.

ISM’s purchasing managers’ index (PMI) was down 0.2 at 49.6 – 50 indicates no change – suggesting that decline was speeding up slightly.

The drop in the index was driven by a large fall in production, which contracted for the first time since March 2009.

On the upside, employment expanded for the 35th consecutive month, and exports declined more slowly than they did in July. And according to ISM, a score of above 42.6 on their manufacturing index is generally consistent with growth in the overall economy.
Markit’s PMI was more positive – though it shrank by 0.4, it remained at 51.5, implying slow growth rather than decline in the industry.

“The overall expansion of the US manufacturing sector remained only modest in August,” said Markit economist Mark Wingham. “The final PMI reading [was] barely any higher than the near-three year low reported in July.

“If the PMI does not pick up substantially in September, the third quarter manufacturing growth will likely be one of the weakest since the recovery began,” Wingham added.

This manufacturing data came as Department of Commerce estimates appeared to show a slowdown in construction recovery. Though spending was up 9.3 per cent on the estimate for last year, it was down 0.9 per cent on June’s $842.2bn, at $834.4bn.

On the other hand, the US car industry appears to have rebounded strongly from its crisis and bailout, according to August sales figures released by the big three yesterday. General Motors boosted sales 10 per cent, while Ford saw a 13 per cent bump, and Chrysler enjoyed a 14 per cent sales increase.