NEW YORK (CNN/Money) -
The nation's manufacturing sector posted slower growth in August, a report from the nation's purchasing managers said Wednesday, as the closely watched ISM index slumped below Wall Street forecasts.
The Institute of Supply Management said its purchasing managers index (PMI) of manufacturing activity fell to 59 in August from 62 in July. Economists surveyed by Briefing.com forecast a reading of 60.
Any reading above 50 shows growth in the sector. Thus, August marked the 15th straight month of growth for manufacturing.
"Overall the sector is still quite positive as both new orders and production remain at high levels," ISM executive Norbert Ore said in a statement. "August's PMI at 59 percent represents the end of a period of nine consecutive months when the PMI was at 60 percent or higher."
The index's employment reading showed slower growth as well, falling to 55.7 from 57.3 in July. But its prices paid index jumped, a sign of growing inflationary pressures in the pipeline.
"Virtually all indices remain at solid levels," Wachovia Securities economist Mark Vitner told CNN/Money. "It's a very strong reading for manufacturing overall. The most disturbing thing is the prices paid which is almost at crisis levels."
Vitner said the report suggests the economy is still strong enough, and inflation is still enough of a threat, that the Federal Reserve will raise interest rates again at its Sept. 21 meeting.
But Vitner noted Friday's employment report would be far more important to predicting what the Fed, the nation's central bank, will do on rates.
In its report, the ISM said the percentage of employers seeing lower employment rose to 15 from 10 in the July survey, while those seeing higher employment levels slipped slightly to 24 percent from 25 percent in July.
Any employment index reading above 48 is seen as sign that manufacturing employment will show an increase in the government's closely watched monthly jobs report, due out this Friday.
The government jobs report has produced disappointing readings on employment the in June and July after strong results in March, April and May.
The ISM prices paid index posted a sharp gain to 81.5 from 77.0 in July, driven by energy prices and customer demand. Those reporting paying higher prices increased to 67 percent in the survey from 58 percent in July. Those paying lower prices stayed unchanged at 4 percent.
Most of the other indexes that make up the overall ISM number, such as those measuring production levels, order backlog and new orders, showed a slowdown from July levels, but still reported growth with readings above 50.
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