US manufacturing activity shrank in August for a fifth month، reflecting faster rates of declines in orders and production.

The Institute for Supply Management’s manufacturing gauge edged up 0.4 point to 47.2، data out Tuesday showed. A reading below 50 indicates contraction.

The S&P 500 and Treasury yields remained lower after the report.

The group’s measure of production slid for a fifth month — deeper into contraction territory — to the lowest level since May 2020. The gauge of new orders، which showed bookings are shrinking، dropped to a 15-month low. Export orders also shrank at the fastest rate since the start of the year.

Declining orders and a persistent retreat in backlogs remain headwinds to production and illustrate a struggling manufacturing sector. While the ISM gauge of factory employment rose، it still showed a third month of contraction.

“To the extent that August’s uptick was supported by a jump in inventories and quicker supplier deliveries، the print indicates the potential for additional goods disinflation. An unintentional build up of inventories sets the stage for a production slowdown in the months ahead،” said Stuart Paul  from Bloomberg Economics.

Borrowing costs

Elevated borrowing costs and uncertainty surrounding the November presidential election are prompting some companies to hold off on capital expenditures and hiring. Still، Federal Reserve policymakers are expected to begin lowering interest rates later this month، which should offer some relief.

“There’s no doubt that the interest rate reductions that will probably come in September are going to help، but I’m not so sure they’re going to help in the short term،” Timothy Fiore، chair of the ISM’s Manufacturing Business Survey Committee، said on a call with reporters. “We’re not going to see things really start to change here until December، January.”