US: Activity at manufacturers disappointed in August - Wells Fargo

According to analysts from Wells Fargo, the decline below 50.0 in the ISM index shows that manufacturers still face a challenging environment.

Key Quotes:

“Economic expansions contain many sub-cycles. For industrial production, the recovery phase from the downdraft appears in tow, but the upside appears limited as production and orders disappoint.”

“Activity at U.S. manufacturers disappointed in August as the ISM manufacturing index fell below breakeven to 49.4 from 52.6 in July. The decline indicates that manufacturers still face a challenging environment.”

“The headwinds from the dollar, weaker expectations for global growth and commodity price weakness continue to linger. Over the past three months, the PMI index has averaged a bit over 51, a signal of modest growth. Our outlook is for some improvement for industrial production in the third quarter after declines in the first half of this year.”

“For a second consecutive month, employment came in below 50 breakeven at 48.3—the weakest reading since March of this year. Of the 18 industries, only five reported improvement—including printing, paper, primary metals and computers. Manufacturing employment has been one of the clearest weak spots in payrolls since the start of the year and today’s number signals that the factory sector’s drag on payrolls will likely continue.”