The August 2011 Manufacturing ISM Report On Business® fell to 50.6% in the data released earlier today. I had expected a reading below 50 which would mean the manufacturing sector was subtracting from GDP growth. But the numbers were above 50 and well above consensus expectations.
Note that the ISM states its PMI manufacturing index needs to be below 42.5 percent, over a period of time, before one could assume a contraction of the overall economy. And we are not close to that point as yet.
In the chart above I highlighted the three key points: new orders and production are contracting while inventories are growing. So, overall, I would consider this a weak report that also exhibited soft forward-looking sub-components.