U.S. manufacturing activity shrank slightly in August while inflationary pressures also eased, according to an industry report released Tuesday. The Institute for Supply Management (ISM) said its manufacturing index fell to 49.9 from 50.0 in July. A reading below 50 indicates contraction in the factory sector, while a reaching above 50 signals expansion. New orders, the backlog of orders, inventories, and employment contracted in the manufacturing sector as high gasoline prices and concerns about the job market kept consumers cautious about spending. The ISM report suggests the manufacturing sector is still struggling, along with the rest of the economy, to overcome the effects o the worst U.S. housing slump since Great Depression of the 1930s. The ISM inflation index hit a six-moth low, however. For the first time in months, several items on the group's commodity-cost list came down, as prices for copper, corn, fuel oil, natural gas, and soybean oil fell. While inflation remained high in August, at a reading of 77, it fell further from its June high of 91.5, the highest level since 1979.
