Manufacturing index slides in August

The Purchasing Manufacturers' Index (PMI) fell 3.2 points to 49.4% due to a general slowdown in the manufacturing industry.
By Bob Vavra, content manager, CFE Media September 1, 2016

Image courtesy: CFE MediaWhether it was just a summer vacation of a sign of tightening in the manufacturing market, the monthly purchasing manufacturers index (PMI) plunged 3.2 percentage points in August to 49.4%. It’s the first time in six months the PMI has falling below the 50% mark, which indicates a contraction in the manufacturing sector.

"Only six of our 18 industries reported an increase in new orders in August (down from 12 in July), and only eight of our 18 industries reported an increase in production in August (down from nine in July)," said Bradley J. Holcomb, chairman of the Institute for Supply Management’s (ISM) Manufacturing Business Survey Committee.

It was the first time the PMI had fallen below 50% since a 49.5% reading in February. Since then, the PMI has been solidly above 50%, reaching 53.2% in June, and there were no signs that the index would fall below the 50% growth rate in August.

The contraction was broad-based and extensive. The New Orders Index plunged 7.8 percentage points to 49.1%. The Production Index dropped 5.8 percentage points to 49.6%, and the Employment Index dropped 1.1 percentage points to 48.3%. That malaise also was reflected in committee member comments for the month, although some sectors reported positive trends. The comments included:

  • "We have been getting lots of inquiries, but not a lot of sales order placements." (Chemical Products)
  • "Business was flat this month overall." (Computer & Electronic Products)
  • "Commercial construction continues to be strong, and therefore our business is very good." (Fabricated Metal Products)
  • "New product distribution is increasing." (Food, Beverage & Tobacco Products)
  • "This past month, sales increased over the trend from the first half of the year. There seems to be a general, albeit slight, loosening of capital purse strings." (Machinery)
  • "Medical device is still strong." (Miscellaneous Manufacturing)
  • "Business conditions are generally flat." (Transportation Equipment)
  • "Hard to find production associates. Unemployment in the area is around 4%. Can’t get enough employees [which] leads to lots of overtime." (Plastics & Rubber Products)
  • "Oil prices continue to seek a ‘footing’; rig count slowly increasing." (Petroleum & Coal Products).

Bob Vavra is content manager, CFE Media, bvavra@cfemedia.com.

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