Last updateThu, 19 Sep 2019 4pm

U.S. Manufacturing Sector Contracts for First Time in 3 Years

According to the Institute for Supply Management (ISM), manufacturing contracted in August as the purchasing managers’ index (PMI) registered 49.1%, a decrease of 2.1% from the July reading of 51.2%. Any reading below 50% indicates contraction in the sector. This is the lowest reading since January 2016, when the index registered 48%. This ended a 35-month expansion period in which the composite index averaged 56.5%.

Second Quarter GDP Revised Down to 2.0% Growth

Gross domestic product (GDP) in the U.S. increased at an annual rate of 2.0% in the second quarter of 2019, according to the most recent estimate released by the Department of Commerce. In the first quarter, GDP increased 3.1%. This GDP estimate is based on more complete source data than were available for the initial estimate issued last month. In that estimate, the increase in GDP was 2.1%. The revision primarily reflected downward revisions to state and local government spending, exports, private inventory investment, and residential investment that were partly offset by an upward revision to personal consumption expenditures.

Durable Goods Orders Up 2.1% in July

New orders for manufactured durable goods in July increased $5.0 billion or 2.1% to $250.4 billion, the U.S. Department of Commerce announced. This increase, up two consecutive months, followed a 1.8% June increase. Excluding transportation, new orders decreased 0.4%. Excluding defense, new orders increased 1.4%. Transportation equipment, also up two consecutive months, drove the increase, $5.7 billion or 7.0% to $86.3 billion.

Texas Manufacturing Expansion Picks Up Pace

Texas factory activity expanded at a faster clip in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, shot up nine points to 17.9, its highest reading in nearly a year. Perceptions of broader business conditions improved in August.

Other measures of manufacturing activity also suggested faster expansion in August. The shipments index rose seven points to 17.6, and the capacity utilization index rose five points to 15.7, both reaching 11-month highs. The new orders index moved up from 5.5 to 9.3, while the growth rate of orders index was largely unchanged at 1.8.

China Announces New Tariffs on $75 Billion in U.S. Products

In response to $300 billion in new tariffs on its products, “China announced its plans to impose 5% to 10% tariffs on $75 billion of American products in response,” writes Kathleen Cusack for the Trade and Manufacturing Monitor. “China’s new tariffs will take effect in two stages, the first on September 1, 2019 and second on December 15, 2019.”

Despite this, the two countries are still expected to sit down and continue trade negotiations next month.

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