The economy's vigorous growth slowed in August, but new orders remained high enough to ensure robust growth through the third quarter, the nation's purchasing managers said in a report released Monday.
The Purchasing Manager's Index slipped to 56.2 in August from 59.0 in July and a yearly peak of 59.3 in June, the National Association of Purchasing Management said.An index above 50 percent generally indicates an economy is expanding.
If the August level continued for the rest of the year, it would be consistent with economic growth of 3.7 percent, said Robert Bretz, chairman of the organization's Business Survey Committee.
The purchasing managers' report is closely watched by economists because it gives solid clues to the direction of the economy. In a change this month, the report includes indexes for each of six specific economic indicators as well as the composite index.
New orders expanded for the 39th consecutive month, but less rapidly. The index fell to 59.9 from 62.1 in July and a peak of 62.7 in June.
Production expanded for the 25th consecutive month, taking seasonal factors into consideration, but the index was down sharply to 58.2 from 62.7 in July and 63.1 in June.
Deliveries by vendors slowed, but the rate of slowing was less than reported in previous months. The proportion of members reporting faster deliveries, 7 percent, was the highest since May 1987. Slow deliveries are a sign that suppliers can't keep up with strong demand. The index fell to 58.1 from 58.8 in July.
Inventories fell in August after rising in July, considering seasonal factors. The index fell to 48.6 from 55.1 in July.
Prices rose, but there was a hint that the rate of increase may be slowing. The index fell to 78.7 from 81.1 in July and was the lowest since 74.1 in March. Slowing increases in metals were offset by rapid increases for farm products caused by the drought.
Employment increased, considering seasonal factors, for the third consecutive month after three months of decline. The index fell to 50.7 from 51.7 in July.
On buying policies, purchasing managers ordered production materials further ahead of time to cope with the slowdown in vendor deliveries. Lead times of 30 days or less for production materials were reported by 51 percent of purchasers.