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The Institute for Supply Management (ISM), the Tempe, Arizona-based trade group, which reports on manufacturing activity and the non-manufacturing services sector, issued its monthly findings on the former within the past hour. (Note that the ISM will release its data on the non-manufacturing, or services, sector on Thursday morning.) 

In the manufacturing survey, the ISM noted that activity fell below the critical 50.0 level--which marks the dividing line between an expanding industrial sector and one that is declining--for the third consecutive month, coming in at a below-forecast 49.6 during the latest month. Readings of 49.7 and 49.8 had been recorded for June and July, respectively. This three-month retreat follows almost three years of uninterrupted expansion in this key economic category.

The ISM manufacturing survey is compiled from data provided monthly by purchasing executives at more than 350 industrial firms. As noted, a reading must exceed the 50.0 level to suggest that industrial activity is on the rise. Expectations had been for a survey result of 49.9. So this was not a big miss, but it was enough of a shortfall to suggest that even though the bulk of the recent postings have been favorable, it is hardly clear sailing for the economy as we move into the final weeks of the summer.

Within this composite, we see that new orders continue to decline, with this index falling to 47.1 in August from 48.0 in July. Also, the production survey result declined sharply from an expansionary 51.3 in July to just 47.2 last month. Also falling in August were supplier deliveries, customers' inventories, backlogs, exports, and imports. Showing improvement were employment, inventories, and prices. In fact, prices jumped from just 39.5 in July to a strongly expansionary 54.0 in August. This was one of the first signs that inflation could be finally starting to increase in earnest.

Overall, we also saw that only eight of the 18 industries surveyed reported growth in August, led by printing and related support activities, and primary metals.

As for individual respondents, the general consensus is that there is a more sluggish incoming order rate at this time. There also were few indications of stronger trends. This was the weakest reading and overall consensus view in some time. The manufacturing report, which is somewhat contradictory to the bulk of the recent data, could increase the odds that the Federal Reserve will opt to soon introduce yet another round of quantitative easing in an effort to give the economy a needed boost. We may know more on that score when the government issues its report on non-farm payroll growth on Friday. The next Fed meeting is on September 12th and 13th.       

At the time of this articles writing, the author did not have positions in any of the companies mentioned.