The nation's manufacturing sector extended its growth streak in August, but its pace was not as robust as July's, in part because of rising energy prices.
The Institute for Supply Management, which issued its monthly report on the industrial sector on Thursday, said its Purchasing Managers' Index (PMI) was at 53.6 percent, down from July's 56.6 percent. While U.S. manufacturing grew for the 27th consecutive month, executives expressed concerns about whether the growth can be sustained amid the persistent rise in energy prices.
A reading above 50 indicates the sector is expanding; below 50 indicates manufacturing activity is shrinking. The index is compiled from a survey of purchasing executives in industries across the country.
"Business is extremely strong, but energy volatility is playing havoc with planning and pricing scenarios," the report said, citing executives within the chemicals industry. Another respondent, with electronic components and equipment, expressed concern "with oil prices and the impact on products that we buy."
One of the ISM index's components, prices that manufacturers paid for goods, surged to 62.5 from July's 48.5, reflecting higher energy costs.
Chris Low, chief economist at FTN Financial, said of the ISM report, "oil had a measurable impact on prices paid before the storm (Hurricane Katrina). Given the fact that we are now seeing energy supply interruptions the prices paid index will almost certainly be back above 70 next month, and its very likely the headline index will fall further on weakness in both production and orders."