By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — A gauge that measures the strength of the factory sector remained below the 50% mark for the third straight month, stirring fears that a slowdown in manufacturing was lingering, according to a closely followed survey of top executives released Tuesday.
It’s the first time there have been three-straight sub-50% readings since the summer of 2009.
The Institute for Supply Management manufacturing index fell to 49.6% in August, lower than the 49.8% in July and the worst reading since July 2009.
Faced with soft consumer and foreign demand, manufacturing production has slowed notably in the past six months.
“It is a sobering picture for manufacturing,” said Bradley Holcomb, chairman of the ISM survey committee.
Economists surveyed by MarketWatch had expected the index to rise to 50.2%. U.S. stocks SPX -0.58% saw steep losses Tuesday morning. Read Market Snapshot.
Readings below 50% in the ISM diffusion index indicate that more firms are contracting than growing. The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better or worse this month than last.
Reports released Monday showed a downturn in manufacturing in Asia and the euro zone. A similar report produced by the firm Markit showed U.S. manufacturing growing at a very slight rate. Read more on Markit survey.
Activity in China’s manufacturing sector slowed at the fastest pace since the financial crisis in 2009.
Only eight of 18 industries as tracked by Tempe, Ariz.-based ISM were growing in August, led by printing, primary metals and food.
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August’s new-orders index fell to 47.1% from 48.0% in July, the ISM’s data showed. This is the lowest reading since April 2009. The new-orders index is an indication of future demand.
Production also weakened, hitting 47.2% from 51.3% in the prior month.
There was also worrisome news on the jobs front as the employment index fell to 51.6% from 52.0% in July. This is the lowest reading since November 2009.
On Friday, the government will report the change in payrolls and the unemployment rate for August.
Economists surveyed by MarketWatch are looking for payrolls to rise 120,000 and for the unemployment rate to hold steady at 8.3%.
The jobs report, along with the ISM, will be critical factors in the Federal Reserve’s coming decision on whether to launch another round of asset purchases at the meeting on Sept. 12-13.
The ISM’s prices gauge rebounded sharply to 54.0% in August from 39.5% in July.
Greg Robb is a senior reporter for MarketWatch in Washington.
