Manufacturing grew at a slower rate in August as the PMI registered 52.9%, a decrease of 0.9 percentage point when compared to July's reading of 53.8%.

"The ISM report for August shows that the manufacturing sector continues to grow despite the turmoil in financial markets," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI.

Industrial activity is neither brisk nor weak, it is growing at a moderate rate. A key driver for the positive industrial outlook is foreign trade. The decline in the dollar, and more importantly a pickup in economic growth in Europe, is finally starting to have a strong beneficial impact on export orders.

"Modest consumer spending? growth in the U.S., on the other hand, has a positive impact in that the growth rate of imported goods is restrained," he added. "With exports growing significantly faster than imports, the industrial sector benefits from more domestic and international orders. An improving foreign trade situation and an ending of an inventory rundown yield moderately paced industrial growth."

A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.