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US manufacturing sector contracts for 1st time in 10 years, IHS Markit says

The U.S. manufacturing sector contracted for the first time since September 2009 as export sales declined at the fastest rate in a decade, according to IHS Markit.

The IHS Markit flash U.S. manufacturing purchasing managers' index fell to a seasonally adjusted reading of 49.9 in August from a final reading of 50.4 in July, while the manufacturing output index inched up to 50.6 from 50.5. An index reading below 50.0 indicates contraction.

IHS Markit said the decline in the headline manufacturing purchasing managers' index was mainly due to a much weaker contribution from new orders, which recorded the sharpest downturn in 10 years.

"Survey respondents indicated that a drop in sales often cited a soft patch across the automotive sector, alongside a headwind to manufacturing exports from weaker global economic conditions," IHS Markit said.

In the wider U.S. private sector, new orders grew at their weakest pace in a decade amid subdued corporate spending. Services companies posted the slowest rate of growth in new work since March 2016.

The flash composite output index, a weighted average of manufacturing output and services business activity data, fell to 50.9 in August from 52.6 in July. The flash services business activity index dropped to 50.9 from 53.0.

Economists polled by Econoday expected the composite output, headline manufacturing and services business activity indexes to all post gains this month, with consensus index readings of 51.9, 50.2 and 52.3, respectively.

The latest survey data shows that economic growth has continued to soften in the third quarter, pointing to annualized GDP growth of about 1.5%, IHS Markit Economics Associate Director Tim Moore said.