Manufacturing Still Healthy, Prices Paid Falls, Construction Spending Declines

- ISM Manufacturing for August fell to 52.9 versus estimates of 53.0 and a reading of 53.8 the prior month.

- ISM Prices Paid for August fell to 63.0 versus estimates of 63.0 and a reading of 65.0 in July.

- Construction spending for July fell .4% versus estimates of unch. and an upwardly revised .1% gain in June.

BOTTOM LINE: Manufacturing in the US cooled slightly in August, but continued to register expansion in the sector, Bloomberg reported. The export component of the index rose to 57 versus 56.5 in July. “Our members aren’t mentioning, in terms of comments, a lot of concerns about the overall financial-market picture,” said Norbert Ore, chairman of ISM’s factory survey. The report suggests “the economy is in great shape. We are not seeing signs yet that the economy is deteriorating significantly,” Ore said. The prices paid component fell to the lowest level since February. The inventory component fell to 45.4 from 48.5 in July. The employment component rose to 51.3 from 50.2 the prior month. I continue to believe manufacturing will help boost overall US economic growth over the intermediate-term as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories.

Spending on US construction projects unexpectedly fell in July, while June’s number was revised higher, according to Bloomberg. According to a recent report, 2Q commercial construction rose by the most since 1981. Public construction rose .7% and private non-residential construction rose .4% in July. I continue to believe construction spending growth has peaked for this cycle as homebuilders pare down inventories and commercial construction slows to more average rates.