US ISM manufacturing index slides to two-year low in August

The US ISM manufacturing index fell to 51.5 in August, posting a larger decline on the month than both we (52.0) and the consensus (52.5) had expected. The decline was led by the components of the survey that tend to be most indicative of future activity.

"As such, we view the August report as confirming our recent view that output and employment for the domestic manufacturing sector are likely to remain sluggish through the end of the year", says Barclays.

New orders (51.7, previous: 56.5) and production (51.7, previous: 56.0) both fell in August, as expected given earlier reading from regional surveys. Employment (51.2, previous: 52.7) softened as well, to the lowest reading since March. Export demand continues to contract (46.5, previous: 48.0), which is seen as likely result of the continued strength in the dollar.

 On balance, the weaker-than-expected headline reading and broad-based softness in the August manufacturing ISM suggest that the goods-producing sector is likely to remain subdued in Q3.