Manufacturing in the U.S. unexpectedly contracted in August for the first time in six months amid slumping orders and production that raise concern of renewed industrial weakness.
The Institute for Supply Management’s index dropped to 49.4, weaker than the most pessimistic estimate in a Bloomberg survey, from 52.6 in July, figures from the Tempe, Arizona-based group showed Thursday. The decline of 3.2 points was the biggest since January 2014.
Fresh orders to American factories shrank for the first time this year, as production was cut by the most since 2012 and employment fell, the report showed. The figures are surprising considering other data point to an economy that is bouncing back on the heels of still-robust consumer spending and progress in paring inventories.
“We’re still in a depressed manufacturing environment,” said Brett Ryan, a U.S. economist at Deutsche Bank Securities Inc. in New York. “That throws some doubt as to whether you can get to above-trend growth that the Fed needs to see over the back half of the year in order to take another step” in raising interest rates.
