Manufacturing Slightly Down But Economy Is Expanding

Manufacturing contracted in August as the PMI registered 49.9 percent, 0.1 percentage point lower than the 50 percent reported in July. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
A PMI in excess of 41.1 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates the overall economy is growing and the manufacturing sector is contracting. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (49.5 percent) corresponds to a 2.6 percent increase in real gross domestic product (GDP). In addition, if the PMI for August (49.9 percent) is annualized, it corresponds to a 2.8 percent increase in real GDP annually."