U.S. manufacturing sector expands in August, though fears persist

The U.S. manufacturing sector has been one of the few bright spots in the otherwise murky economic recovery over the past two years. Working with procurement consultants, U.S. factories have successfully achieved manufacturing cost reductions, helping to drive efficiency. The U.S. manufacturing sector expanded again in August, according to the latest report from the Institute of Supply Management.

Released Friday, the August 2011 Manufacturing ISM Report on Business helped to allay concerns that the U.S. is slipping into a so-called double-dip recession. According to ISM data, economic activity in the U.S. manufacturing sector expanded in August for the 25th consecutive month, with the overall economy growing for the 27th straight month.

The bleak economic news emanating from Washington over the past few weeks had fueled anxieties that manufacturers would experience their first monthly contraction in more than two years, but industry experts assert many U.S. factories are continuing to experience brisk demand for their goods.

On the other hand, some analysts affirm the U.S. economy is already in the midst of another recession, and that the current data does not reflect the actual state of the economy. They contend the gradual fall in demand - and activity - at U.S. factories indicates GDP growth has turned toward negative territory.

Still, ISM data, aggregated from the nation's supply chain executives, illustrates the U.S. manufacturing sector is growing - at least for the time being. According to the group's August report, the PMI registered 50.6 percent, a slight decrease from July's reading of 50.9 percent. A reading above 50 generally indicates the sector is expanding.

Though the August reading surpassed the critical 50 percent threshold, it represented the lowest reading since July 2009, when it registered 49 percent. A reading higher than 42.5 percent tends to show that the overall economy is growing, which analysts contend bolsters the case the U.S. has, at least for now, not dipped back into a recession.

In more mixed news, the ISM's New Orders Index registered 49.6 percent in August, representing an increase of 0.4 percentage point from July's 49.2 percent reading. While U.S. factories witnessed an uptick in demand for their goods during August, the reading was still below 50 percent, and served as the second consecutive month of contractions in the index.

The Production Index, on the other hand, witnessed a precipitous drop in August, falling 3.7 percentage points to 48.6 percent. The reading in July was logged at 52.3 percent, and August's fall was the first contraction in 26 months. What's more, it also serves as the index's lowest monthly reading since May 2009, when it hit 45 percent. 

Moreover, hiring in the U.S. manufacturing sector continued to expand in August, but it dropped from July's elevated level. ISM's August Employment Index clocked in at 51.8 percent, down 1.7 percentage points from the month prior. The August reading represents the index's lowest such level since November 2009, Reuters reports.

"The PMI registered 50.6 percent, a decrease of 0.3 percentage point from July, indicating expansion in the manufacturing sector for the 25th consecutive month, at a slightly slower rate," ISM chairman Bradley J. Holcomb said in a statement. "The overall sentiment is one of concern and caution over the domestic and international economic environment, which is affecting customers' confidence and willingness to place orders, at least in the short term."