WASHINGTON — Manufacturing contracted for a third month in August, the longest slide since the recession ended and a sign the expansion is at risk of losing a source of strength.
The Institute for Supply Management’s factory index fell to 49.6 last month, the lowest since July 2009, from 49.8 in July, the Tempe, Ariz.-based group said today. Economists in the Bloomberg survey projected an August reading of 50, which is the dividing line between expansion and contraction.
The possibility that taxes will rise and government outlays will shrink if U.S. lawmakers don’t act by January may shake confidence and cause consumers and businesses to curb spending. The European debt crisis represents another stumbling block that threatens to limit orders to American factories.
“Manufacturing has largely stalled,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. “The consumer picked up a bit in August, and that should help the manufacturing environment stabilize, but we don’t really look for a robust acceleration anytime soon.”
Estimates for the index from the 81 economists surveyed ranged from 48.7 to 51.5. A reading above 42.5 generally indicates an expansion in the overall economy, the ISM has said. The gauge averaged 55.2 in 2011 and 57.3 a year earlier.
The slowdown at factories comes as 8.3 percent unemployment restrains consumer demand and cooling global growth reduces new businesses orders. Household spending increased at a 1.7 percent annual rate in the second quarter, the smallest advance in a year, Commerce Department data show. Corporate spending on equipment and software rose at a 4.7 percent pace in that period, the weakest since the third quarter of 2009.