In August, the US manufacturing ISM remained in slight contraction territory, while the consensus was looking for an increase to 50. The manufacturing ISM dropped from 49.8 to 49.6 in August, indicating that the pace of contraction broadly stabilized. The manufacturing ISM is now at its lowest level in more than three years and also the details remain poor. Production (47.2 from 51.3) weakened further during the month and also new orders (57.1 from 48), employment (51.6 from 52.0), backlog of orders (42.5 from 43.0), customer inventories (49 from 49.5) and imports (49.0 from 50.5) showed no signs of improvement. Inventories (53.0 from 49.0) picked slightly up and new export orders (47.0 from 46.5) contracted at a slower pace. The prices paid index rose sharply, from 39.5 to 54.0, suggesting that manufacturers are facing increasing costs.
Overall, it is slightly disappointing that the US manufacturing ISM remains in contraction territory, while most had hoped for a slight pick-up. Both orders and production are contracting as external demand remains poor due to slowing growth in Asia and Europe, while the fiscal cliff in the US adds to uncertainty.