Economic expansion continued at a slow pace in August

Economic activity in the manufacturing sector expanded in August for the 25th consecutive month and the overall economy grew for the 27th consecutive month, according to U.S. supply executives in the latest Manufacturing ISM Report on Business.

The PMI registered 50.6 percent, a decrease of 0.3 percentage point from July. The level indicated expansion in the manufacturing sector for the 25th consecutive month, but at a slower rate. The Production Index registered 48.6 percent, indicating contraction for the first time since May 2009 when it registered 45 percent. The New Orders and Backlog of Orders Indexes were up from July. However, both indexes indicated contraction in August at slower rates than in July. The rate of increase in prices slowed for the fourth consecutive month, dropping 3.5 percentage points in August to 55.5 percent.

The report said overall sentiment was one of "concern and caution" over the domestic and international economic environment. That sentiment is affecting customers' confidence and willingness to place orders at least in the short term, the report said.

Of the 18 manufacturing industries, 10 reported growth in August. ISM's New Orders Index registered 49.6 percent. That was an increase of 0.4 percentage points compared to the 49.2 percent reported in July. August was the second consecutive month of contraction in the New Orders Index, following 24 months of growth. The last time the index contracted was in June 2009, when the New Orders Index registered 48.9 percent.

ISM's Production Index registered 48.6 percent in August. That was a decrease of 3.7 percentage points when compared to the July reading of 52.3 percent. August was the first month of contraction in the Production Index, following 26 months of growth. It also was the lowest reading since May 2009 when it registered 45 percent.

ISM's Employment Index registered 51.8 percent in August. That was 1.7 percentage points lower than the 53.5 percent reported in July. While this month represents the 23rd consecutive month of growth in manufacturing employment, the August reading was also the lowest since November 2009 when the index registered 50.4 percent.

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