Longest Slide in Manufacturing Since ’09 Shows Economic Cracks

As Democrats gather in Charlotte to nominate President Barack Obama for a second term, a pillar of the economic recovery showed some cracks.

The Institute for Supply Management said today American factories pulled back in August for a third consecutive month, the worst performance since the end of the recession and early days of recovery in mid-2009.

Members of the purchasing managers’ group have a finger on the pulse of nation’s plants because they are the ones charged with buying the materials needed to keep assembly lines running.

The data showed dwindling orders and shrinking backlogs prompted factories to cut production for the first time in three years.

“As I look at this and try to find some rays of sunshine, it’s quite difficult,” Brad Holcomb, chairman of the ISM manufacturing survey, said on a conference call with reporters. “I would characterize this as a sobering picture of U.S. manufacturing right now without any clear signs of immediate improvement.”

One reason for the dreary outlook was that the most forward-looking aspects of the report, namely orders, sank to the weakest point since April 2009, during the last recession.

At the same time, inventories were the most elevated in almost a year.

Fewer bookings and growing stockpiles aren’t a recipe for a quick turnaround, which may keep activity depressed for months.

One caveat is that the report is a measure of sentiment rather than hard facts. In other words, purchasing managers have a good sense of what’s happening on the factory floor from conversations with production managers and the head of human resources for example, rather than the actual number of widgets produced or the number of workers hired or fired.

Another, is that one key area of manufacturing, namely auto making, continues to show progress. Chrysler, Ford and GM said today U.S. sales rose more in August than analysts estimated as the carmakers introduced new models.

As the president who pushed for the bailout of the auto industry during the depths of the recession, Obama can take some solace in that this week.

By Carlos Torres

Courtesy of Bloomberg News

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