PMI for August is 49.9% suggesting the economy is still growing

The Institute for Supply Management released their monthly Manufacturing ISM Report on Business today. The Purchasing Manager's Index (PMI) came in at 49.9% for August which was just under the reading of 50% for July. A PMI reading of 49.9% suggests that the manufacturing economy is slightly contracting. Per ISM: "A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 41.1 percent, over a period of time, generally indicates an expansion of the overall economy." PMI has been under 50 5 times this year, it has been at 50 once, and it has been above 50 just two times.  PMI has averaged 49.5% in 2008. Economists had expected PMI to come in at 50.0%.

Here is what some of the respondents to the ISM survey are saying:

• "Business is picking up and continues to improve for projects to be constructed in 3rd and 4th quarters 2008." (Electrical Equipment, Appliances & Components)
• "The lower oil prices and stronger dollar are good news." (Fabricated Metal Products)
• "We are contracting our manufacturing skills to companies involved in wind power, coal mining and other energy fields in order to ride the recessionary wave in the rust belt." (Machinery)
• "Material prices continue to rise; however, selling prices of our products have risen as well." (Paper Products)
• "Prices remain predictable ... they keep going up." (Food, Beverage & Tobacco Products)

Manufacturing is continuing to hold up in spite of the softening economy.

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