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U.S. Manufacturing Declines After 5 Straight Months Of Modest Growth

Fed building

The American manufacturing industry declined in August after five consecutive months of growth as producers deal with the consequences of low oil prices and a weak global economy.

An index monitored by the Institute for Supply Management, which tracks domestic manufacturing activity, reported a dip to 49.4 from 52.6 in July of this year. Figures above 50 indicate sector growth, while figures below 50 indicate contraction.

Experts expected growth to decline to 52, however, they were surprised to find an overall market downsizing.

Of the 18 aspects of American manufacturing the index tracks, 11 shrank over the course of August. Employment and production rates were both below the 50 percent mark.

The industry last contracted in February, which was the last of a series of months in late 2015 and early 2016 with decreasing sector activity.

USA Today reported that the slowdown could also be attributed to China’s slowing economy, the European Union’s many financial crises, and the effects of a strong dollar on American export prices.

"The data from this report indicate that the U.S. manufacturing sector remains in an extended period of stagnation following a modest improvement in recent months," Barclays' chief U.S. economist, Michael Gapen, said in a note to the consulting firm’s clients.

The S&P 500 index dropped by 0.17 percent after the report was released, reaching an almost one-month low.

“All eyes are focusing in on tomorrow’s jobs report -- some of the softness we’ve seen in the market this week is a little bit of anxiety that the [Federal Reserve] might be raising rates in September as opposed to pushing back to December,” Tom Wilson, a senior director at Brinker Capital Inc. told Bloomberg.

The Bureau of Labor Statistics is due to release its job report tomorrow. Growth of 250,000 jobs or more could lead the Fed to raise interest rates later this month, according to Wall Street analysts.

By Zainab Calcuttawala for Oilprice.com

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