The ISM Manufacturing PMI continues to indicate contraction

The manufacturing sector in the United States is facing challenges, but the increase in the PMI index suggests a deceleration in the pace of contraction.

Key Insights

• The ISM Manufacturing PMI expanded slightly from 46.4 in July to 47.6 in August.
• The New Orders index saw a slight increase from 47.3 to 46.8.
• The Employment index showed improvement, rising from 44.4 to 48.5.

The Institute for Supply Management (ISM) released the August ISM Manufacturing PMI report, which showed an increase from 46.4 in July to 47.6 in August, surpassing the consensus expectation of 47. A reading below 50 indicates a contraction in the manufacturing sector.

The New Orders index declined from 47.3 to 46.8, while the Employment index improved from 44.4 to 48.5. However, both indices remained in contraction territory.

According to the ISM, the U.S. manufacturing sector continued to shrink, but the PMI increase suggests a slower rate of contraction. The rise in the composite index indicates that companies are managing their outputs appropriately amid softness in orders, signaling some improvement.

Additionally, the final reading of the S&P Global Manufacturing PMI for August indicated a decline from 49 in July to 47.9 in August, below the consensus forecast of 47.

Following the release of the better-than-expected ISM Manufacturing PMI report, the U.S. Dollar Index gained ground, while Treasury yields moved higher, providing support to the American currency.

Gold prices retreated towards the $1940 level as traders focused on the stronger dollar and rising Treasury yields. The ISM report acted as an additional negative catalyst for the gold market.

The S&P 500 index settled close to the 4530 level, with major indices trending higher as traders speculated that the Federal Reserve would not raise interest rates this year.