U.S. Manufacturing Data Hints at Slowing Economy

September 06, 2012 | ,

Our first Chart of the Week for 2012 covered the ISM Manufacturing Index, with December’s value of 53.9 indicating signs of economic expansion (above 50) and a positive outlook heading into 2012. We revisit the ISM index this week to gauge the current health of the manufacturing sector.

As indicated by the chart below, the ISM stayed above 50 through May, indicating further expansion in the manufacturing sector and therefore legitimate reason for optimism regarding economic growth. However, the past three months have seen manufacturing face some headwinds, with the index falling below the 50 mark with the release of the June data at 49.7. Given the latest August release, the ISM has been below 50 for the past three months, indicating an ongoing drag to economic growth from a slowing manufacturing sector. Unfortunately, the lack of sustained expansion in the manufacturing sector is likely to contribute to the currently high unemployment rate as factories are hesitant to hire large pools of new workers until they have more confidence in their long-term growth prospects.