US Manufacturing Recession Begins: ISM Contracts First Time in 3 Years


The manufacturing ISM dipped below the 50 mark signaling contraction. New orders, production, and employment are down.

The August 2019 Manufacturing ISM® Report On Business® shows New Orders, Production, and Employment Contracting.

New export orders fell 4.8 points to an anemic 43.3. Prices have fallen for three months.

The backlog of orders contracted for four months. Manufacturers cannot use backlogs to maintain employment. So unless there is a quick turnaround, more layoffs or reduced hours are right around the corner.

Markit PMI Confirms

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Markit's US Manufanucturing PMI, also released today, fell to the lowest in nearly a decade. It's positive but barely.

Key Findings

  1. PMI at 50.3 in August (49.9 flash, 50.4 in July), lowest since September 2009
  2. Rates of output and new order growth remain subdued
  3. New export orders fall at quickest pace for 10 years
  4. The rate of production growth was among the slowest seen for over three years in August, as lacklustre client demand led increasing numbers of firms to curb output.
  5. The pace of the upturn in new business eased to a fractional rate that was the slowest for three months and among the weakest seen over the past ten years.
  6. Deteriorating demand conditions, especially across the automotive sector, were linked to subdued client demand.
  7. External demand also weighed on new business growth, as new export orders fell at the quickest pace since August 2009, linked by many firms to trade wars and tariffs.

Chris Williamson, Markit Chief Economist Comments

  • "The August PMI indicates that US manufacturers are enduring a torrid summer, with the main survey gauge down to its lowest since the depths of the financial crisis in 2009. Output and order book indices are both among the lowest seen for a decade, indicating that manufacturing is likely to have again acted as a significant drag on the economy in the third quarter, dampening GDP growth.”
  • “At current levels, the survey indicates that manufacturing production is falling at an annualized rate of approximately 3%.”
  • “Deteriorating exports are the key to the downturn, with new orders from foreign markets dropping at the fastest rate since 2009. Many companies blame slower global economic growth for weakened order books, but also point the finger at rising trade war tensions and tariffs.”
  • “Hiring has stalled as companies worry about the outlook: optimism about the year ahead is at its lowest since comparable data were first available in 2012. Similarly, price pressures are close to a three-year low, as crumbling demand has removed firms’ pricing power.”

Markit Eurozone Manufacturing PMI

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The Markit Eurozone Manufacturing PMI® final data confirms the Eurozone manufacturing slump.

Key Points

  • Final Eurozone Manufacturing PMI at 47.0 in August (Flash: 47.0, July Final: 46.5)
  • Production and new orders continue to fall as confidence hits lowest since November 2012
  • Employment declines for fourth month running during August

Eurozone Countries

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Germany, Italy, and Spain (the first, third, and fourth largest Eurozone economies) are all in contraction.

Global Manufacturing PMI

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Global Manufacturing Recession

Markit's Global Manufacturing PMI confirms the manufacturing recession.

Diffusion Indexes

As commented previously, these are diffusion indexes prone to interpretation problems. All that matters is direction. A company laying off 3 employees will offset another company hiring 200 employees.

However, all of the reports now say the same thing and it isn't pretty.

Global Recession Coming

On August 2, I commented Global Manufacturing Recession Started: Trump's China Tariffs Made Matters Worse

It is increasingly clear that is the correct view. But what about a real recession?

How Much Lead Time Do You Expect?

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A global manufacturing recession was already underway. Today the US joined the party.

Once again please consider Manufacturing Recessions vs Real Recessions: How Much Lead Time Do You Expect?

For further discussion, please see Debunking the Myth “Consumer Spending is 67% of GDP”.

Also consider Major Supply Chain Disruptions Coming: Thank Trump.

Finally, please note Trump's Trade War Takes Toll on South Korea and Japan.

Mike "Mish" Shedlock

Comments (16)

Mish, I am at a loss. You post something like this and I am impressed beyond belief. I have followed you and a select band of other posters for ten years or more. Your track record speaks for itself. I unhesitatingly recommend you to my friends and relations and receive thanks for doing so. Anyone who reads your stuff is ahead of the game. I don't understand how you misread UK and European politics so badly. On economics if everyone was saying " it is white " and you said "No it is black " I would trust you. Help please.


Global economy going into recession and Silver is up almost 4% today - and is now up 25% in the past 6 months. Not trading like an industrial metal lately.



Excellent observation from Bam on silver.



Thanks again to AvidRemainer for his comments on this post. I could easily have rushed it. Instead I spent a couple hours to tie everything together. I seldom beat Zerohedge to anything because I want to make a case, not just parrot one report.


Trump’s 5-D strategy is loss-loss-loss, i.e. loss for everybody, while hoping that China would lose the most.

Tony Bennett
Tony Bennett

"A global manufacturing recession was already underway. Today the US joined the party."


Too much "stuff" produced (to beat tariffs?) the past couple of years relative to credit worthy demand. Meanwhile, getting ever closer to the "no mas" moment where debt exhausted folks retrench / walk away rather than take on more.


are any of you involved in manufacturing? Biggest problem that most firms see is a lack of labor. You can't produce more without employees and and it's pointless to invest in capital equipment as the technological changes don't support the cost. Robotics were supposed to be the answer but the technology, for all the hype, doesn't deliver. I don't know where the surveys get the data. the ones I see, I fill out as fast as can so I can get back to doing something worthwhile. Garbage in garbage out.

Ted R
Ted R

Trump better start lining up a few scapegoats to blame this recession, yes a recession has begun, on. It may be his only chance for reelection.

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