US Purchasing Managers Index Falls Below 50, Signals Contraction

In August, US manufacturing activity contracted 2.1 points from July, the largest contraction in nearly three years. According to the Institute of Supply Management (ISM) Purchasing Manufacturing Index (PMI) - commonly referred to as the ISM manufacturing index - fell to 49.1, making the US a late comer to a growing club of large economies, such as China, the Eurozone, Japan, and the United Kingdom, that have likewise reported contracting manufacturing sectors in recent months.

• The PMI is being dragged down by a sharp decline in new orders, non-farm employment (which increased by only 130,000 in August), and new exports as trade tensions with China weighed on business confidence and deepened growing fears of economic recession. 
• Declining oil prices have also contributed to the decline of industrial production vis-a-vis restricted investment in the energy sector - the largest and fastest-growing industrial sector in the US - indicated by steadily declining oil and gas rig counts. 
• The US Federal Reserve industrial production index indicates that manufacturing production also decreased during the first two quarters on 2019, suggesting the US is already in recession.