ism first contraction in 35 months. impact of trade war?

If August proves to be the beginning of a negative streak for the PMI, it will raise questions whether a recession is on the way.

The index is considered a leading indicator, providing a gauge for where manufacturing is heading. The ISM report is based on a survey of 350 purchasing and supply executives. A reading above 50 percent indicates a growing manufacturing economy. Below 50 percent indicates economic contraction. The PMI has averaged 54.4 percent the past 12 months.

Nine of 18 industries reported economic growth in August, including textiles, machinery and miscellaneous manufacturing. Seven industries reported economic contraction, including fabricated metal products and transportation equipment.

ISM said last month’s results showed weakness in new orders, production and employment.

“The primary contributor here is new orders,” Fiore said on a conference call. New orders will need to improve to boost the overall manufacturing economy, he said.

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