American manufacturing grew in August, but flashed a 'warning light'

Factory sparks robots manufacturingBill Pugliano/GettyA crossover SUV vehicle is welded by robot arms as it goes through the assembly line at the General Motors Lansing Delta Township Assembly Plant March 10, 2010 in Lansing, Michigan. The Delta plant has more than 3,000 workers on two shifts and is expected to add a third shift of 900-1,000 workers in April. The plant produces the Buick Enclave, Chevrolet Traverse, and GMC Acadia crossover SUVs.

The latest reading for Markit’s flash manufacturing purchasing manager’s index came in at 52.1 for August, down from the prior month’s 52.9 and lower than economists’ expectations of 52.7.

July’s reading was the strongest since November 2015, which mitigates the disappointment from August’s lower number. Furthermore, the reading was still above 50, signalling expansion.

Markit Chief Business Economist Chris Williamson observed that the August reading is less worrying given the strong number the month prior but the new report was nonetheless a “disappointment.”

One of the weakest points of the report, according to Williamson, was growth in orders for manufacturing firms.

“However, a slowdown in overall order book growth is a warning light that domestic demand has waned in August, and the pull-back in hiring suggests manufacturers have become increasingly cautious about the outlook,” wrote Williamson in the release.

On the upside, however, was export growth. Shipments to foreign buyers registered its highest number in 23 months despite being held back slightly due to concerns over the US presidential election.

“While some companies commented that a number of clients had adopted a wait-and-a-see approach until the outcome of the presidential election, others mentioned that total new work had been boosted by new foreign client wins over the latest survey period,” said the release.

Employment was weaker than recent readings, according to the release from Markit, registering the weakest month for payroll growth in four months.

Overall, according to Williamson, the lower-than-expected report should raise some questions on domestic demand, but still paints a decent picture of American manufacturing.

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