WASHINGTON, Sept 3 (Reuters) - U.S. manufacturing contracted at a moderate pace in August amid some improvement in employment, but a further decline in new orders and rise in inventory suggested factory activity could remain subdued for a while.
The survey from the Institute for Supply Management (ISM) on Tuesday also showed manufacturers continuing to pay higher prices for inputs last month. It did not change expectations that the Federal Reserve will cut interest rates by 25 basis points when it kicks off its long awaited easing cycle this month.
"Input price pressures moved up modestly to the highest in three months, but they are not so high in our judgment to threaten continued slow disinflation," said Conrad DeQuadros, senior economic advisor at Brean Capital. "No bar to a September rate cut here but nothing to push the Fed to a half-point cut either."
The ISM said its manufacturing PMI rose to 47.2 last month from 46.8 in July, which was the lowest reading since November. A PMI reading below 50 indicates contraction in the manufacturing sector, which accounts for 10.3% of the economy.