ISM Manufacturing Report Shows Broad Weakness

ISM manufacturing is among the most closely followed reports on the economic calendar and August's unexpected drop below 50 to 49.1 may very well make a rate-cut at the September 17 and 18 FOMC a certainty. And given the broad weakness throughout the report, an upsized 50 basis point cut may well be in play.

New orders fell well below 50, down 3.6 points at 47.2, with new export orders down nearly 5 points at a sobering 43.3. Total backlog orders did improve but are still well into contraction at 47.4. The word improving doesn't really fit with the August report though supplier deliveries also improved though improvement here, that is better delivery times, reflects weakened levels of demand. Employment fell 4.3 points to 47.4 with production down 1.3 points at 49.5.

Prices paid round out August's report, below 50 at 46.0 to confirm that demand is low and also pointing to disinflationary pressures for consumer prices in what is another strong argument for lower rates. The ISM is only one sample but it does confirm, actually in dramatic sub-50 fashion, weakness in other data including this morning's manufacturing PMI.

This report is suddenly looking like many of the global manufacturing PMIs with the mid-40 readings for many of the details evoking the recent troubles for Germany's PMI data. With new cross-border tariffs between the US and China having taken effect over the weekend, the outlook for this report next month is not promising. These numbers mark a somber inflection lower for the US manufacturing outlook.