PMI declined to 49.2 in August from a reading of 50.1 a month earlier. A report below 50 indicates deterioration.
Economists polled by Thomson Reuters had forecast a neutral reading of 50 during the month.
Weakness in new orders pulled the headline index lower, with the sub-index falling to 48.7. Total output also declined, down to 50.9, but remained in positive territory.
Export demand remained roughly unchanged during the month, at 46.6.