U.S. manufacturing sector contracts for first time in nearly a decade: IHS Markit

U.S. manufacturing purchasing managers index (PMI) dropped to 49.9 in August, flashing a sign of contraction for the first time since September 2009, estimates released Thursday by IHS Markit showed.

Robots weld cars in an assembly line in Baltimore, Maryland, USA. [File photo: IC]

The August figure was down from 50.4 in July, the London-based global information provider said in its press release. Any indicator that's below the neutral 50.0 threshold is considered a warning of contraction.

"The decline in the headline PMI mainly reflected a much weaker contribution from new orders," the release said. "New business received by manufacturing companies fell for the second time in the past four months during August."

It also said latest data signaled the fastest reduction in export sales since August 2009.

The manufacturing PMI is a composite index based on a weighted combination of survey variables including new orders, output, employment, suppliers' delivery times, and stocks of materials purchased, the New York-listed company said in an explanatory note.

"Manufacturing companies continued to feel the impact of slowing global economic conditions," Tim Moore, economics associate director at IHS Markit, said in comments on the results. "August's survey data provides a clear signal that economic growth has continued to soften in the third quarter."

Monthly changes in other indicators include the Flash U.S. Composite Output Index dropping to a three-month low of 50.9 compared to 52.6 in July, the Flash U.S. Services Business Activity Index tumbling to a three-month low of 50.9 from the prior month's 53.0, while the Flash U.S. Manufacturing Output Index jumping to a two-month high of 50.6 from last month's 50.5.

"The most concerning aspect of the latest data is a slowdown in new business growth to its weakest in a decade, driven by a sharp loss of momentum across the service sector," Moore said.

"Survey respondents commented on a headwind from subdued corporate spending as softer growth expectations at home and internationally encouraged tighter budget setting," he said, adding that business expectations for the year ahead "became more gloomy."

Final August data are due Sept. 3 for manufacturing and Sept. 5 for services and composite indicators. IHS Markit said.