In August, US manufacturing activity contracted 2.1 points from July, the largest contraction in nearly three years. According to the Institute of Supply Management (ISM) Purchasing Manufacturing Index (PMI) - commonly referred to as the ISM manufacturing index - fell to 49.1, making the US a late comer to a growing club of large economies, such as China, the Eurozone, Japan, and the United Kingdom, that have likewise reported contracting manufacturing sectors in recent months.

  • The PMI is being dragged down by a sharp decline in new orders, non-farm employment (which increased by only 130,000 in August), and new exports as trade tensions with China weighed on business confidence and deepened growing fears of economic recession. 
  • Declining oil prices have also contributed to the decline of industrial production vis-a-vis restricted investment in the energy sector - the largest and fastest-growing industrial sector in the US - indicated by steadily declining oil and gas rig counts
  • The US Federal Reserve industrial production index indicates that manufacturing production also decreased during the first two quarters on 2019, suggesting the US is already in recession.

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