American manufacturing activity declines as rising tariffs have made the materials more expensive. The sector shrank for the first time since September 2009, according to IHS Markit.
Markit's index of leading flash purchasing executives for August fell just under 50, indicating a contraction. It was a 119 month low for the index. A number below 50 means that a sector is contracting, while a number above 50 indicates growth.
The August decline is due to weak new orders, which offset slightly faster production, according to Markit. Production output rose to a two-month high of 50.6.
"August's survey data give a clear signal that economic growth has continued to soften in the third quarter," said Tim Moore, CFO I Mo Markit.
PMI data is based on a business survey which showed that confidence in the coming year fell for the seventh consecutive month and is at its lowest level since July 201
Production has been hurt by the US-China trade war, which has weighed down global demand. It has stimulated global growth and hurt export sales, Moore said.
But the "most complicated aspect" of the latest data is a slowdown in new business growth, which dropped to the weakest level in a decade, Moore said. Growth has slowed down due to a sharp loss of momentum in the service sector.
Services were also reduced in August, but they remain in growth territory. The composite flash PMI stood at 50.9, a three-month low.