The Composite Index of activity in the manufacturing sector, reported by the Institute of Supply Management, backpedaled three points in August to 53.6 following a like-sized increase in July. The decline outpaced Consensus expectations for a modest increase to 57.0. (In light of this week's published decline in the Chicago PMI, Consensus expectations may have ratcheted down.)

During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.

Pricing in the factory sector firmed to the strongest since April. The prices paid index rose to 62.5 following three months of decline.

Production gave back nearly all of the prior month's gain with a 5.3 drop. Likewise, the new orders index fell 4.2 points and reversed more than all of the July increase as the export order index also fell. Inventory restocking eased as the inventory index fell for the second month to the lowest level since October 2003.

The rate of job creation eased slightly in August though the index level of 52.6 continued to indicate positive growth. During the last twenty years there has been a 67% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.