Tags: Manufacturing | US | Economy | jobs

Economist: Manufacturing ‘Losing Momentum’ as Economy Continues to Sputter

Tuesday, 04 Sep 2012 11:14 AM

Manufacturing shrank at its sharpest clip in more than three years last month, while separate data showed exports and hiring in the sector slumped in another shot to the country's struggling economy.

August was the third month in a row of contraction in manufacturing, and firms in the sector hired the fewest workers since late 2009, according to an Institute for Supply Management survey on Tuesday.

ISM's index of national factory activity fell to 49.6 in August, from 49.8 in July, and just shy of the 50.0 median estimate in a Reuters poll of economists. A reading below 50 indicates contraction in the key sector.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

Manufacturing has been a drag on the slow U.S. economic recovery, which is stalling and struggling to add jobs now some three years after the brutal recession and financial crisis ended.

U.S. unemployment in July stood at 8.3 percent, a high reading that is causing deep concern at the Federal Reserve and that has taken center stage in the presidential election campaign. The government's jobs report for August is due on Friday.

"It has become increasingly clear that the manufacturing sector is losing momentum," said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York. "This soft report leading into Friday's payrolls will only solidify additional action from the Fed if we see another soft jobs report."

A separate gauge of manufacturing on Tuesday, the Markit U.S. Manufacturing Purchasing Managers Index, showed the sector grew in August but at a pace that was still one of the weakest since the sector stopped shrinking in October of 2009.

In a relative bright spot, Markit's index stood at 51.5 last month, higher than the 51.4 reading in July thanks to a slight increase in output and overall new orders.

But August's reading fell short of a preliminary estimate as exports declined for a third straight month, and firms were slow to add new workers. New export orders were a drag on activity, as slow or negative growth in Europe and elsewhere sapped foreign demand for U.S. products, the survey showed.

Expansion in the sector was "only modest" in August, said Mark Wingham, Markit economist. Without a significant jump in activity next month, manufacturing growth in the third quarter "will likely be one of the weakest since recovery began," he said.

ALL EYES ON AUGUST JOBS

The next big test of the U.S. recovery will be the August employment data, later this week, for which the median forecast of economists polled by Reuters is a gain of 120,000 jobs, down from 163,000 in July.

Some analysts suspect a number below 100,000 could provoke the Fed to try to boost overall growth with another round of monetary stimulus when it meets in mid-September.

In the auto sector, Chrysler Group LLC on Tuesday reported its 29th consecutive month of year-on-year sales gains with a 14-percent rise in August. The first on Tuesday to report on last month's activity, Chrysler said sales were 148,472 vehicles, which the company said showed its best performance for August since 2007.

Elsewhere, another report showed that lending to small U.S. businesses edged up in July, but the size of the increase was too modest to signal that there was much momentum to the economy.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small American companies, rose to 103.8 from 100.5 in June, PayNet said. Borrowing was up 15 percent from a year earlier.

"It doesn't really signal as much strength in a composite view as you would think," said PayNet founder Bill Phelan. "We're still seeing these very halting numbers, and we're not seeing just a strong indicator of growth."

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion


© 2017 Thomson/Reuters. All rights reserved.

   
1Like our page
2Share
640
2012-14-04
Tuesday, 04 Sep 2012 11:14 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved