Economic activity in the manufacturing sector grew in August, with the overall economy achieving a 27th consecutive month of growth, say the nation’s supply executives in the latest manufacturing ISM report on business.
The report was issued today by Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) manufacturing business survey committee:
“The August manufacturing PMI® registered 52.8%, the same reading as recorded in July. This figure indicates expansion in the overall economy for the 27th month in a row after contraction in April and May 2020. For a second straight month, the manufacturing PMI figure is the lowest since June 2020, when it registered 52.4%. The New Orders Index registered 51.3%, 3.3% higher than the 48% recorded in July. The production index reading of 50.4% is a 3.1% decrease compared to July’s figure of 53.5%. The prices index registered 52.5%, down 7.5%compared to the July figure of 60%; this is the index’s lowest reading since June 2020 (51.3%). The backlog of orders index registered 53%, 1.7%above the July reading of 51.3%. After three straight months of contraction, the employment index expanded at 54.2, 4.3% higher than the 49.9% recorded in July. The supplier deliveries index reading of 55.1% is 0.1% lower than the July figure of 55.2%. The inventories index registered 53.1%, 4.2% lower than the July reading of 57.3%. The new export orders index contracted at 49.4%, down 3.2% compared to July’s figure of 52.6%. The imports index remained in expansion territory at 52.5%, but 1.9%below the July reading of 54.4%.”
“The U.S. manufacturing sector continues expanding at rates similar to the prior two months. New order rates returned to expansion levels, supplier deliveries remain at appropriate tension levels and prices softened again, reflecting movement toward supply/demand balance,” Fiore said. “According to business survey committee respondents’ comments, companies continued to hire at strong rates in August, with few indications of layoffs, hiring freezes or head-count reductions through attrition. Panelists reported lower rates of quits, a positive trend. Prices expansion eased dramatically in August, which — when coupled with lead times easing — should bring buyers back into the market, improving new order levels. Sentiment remained optimistic regarding demand, with five positive growth comments for every cautious comment. Panelists continue to express unease about a softening economy, with 18% of comments noting concern about order book contraction. Twelve percent of panelists’ comments reflect growing worries about total supply chain inventory. Demand increased, with the new orders index returning to expansion, customers’ inventories index remaining at a low level, retreating slightly compared to July and backlog of orders index increasing its rate of growth. Consumption (measured by the production and employment indexes) improved during the period, with a combined positive 1.2% impact on the manufacturing PMI calculation. The employment index returned to expansion after three months of contraction, and the production index lost ground but remained in growth territory. With the gains in hiring and fewer supplier delivery issues, production expansion should improve in September. Inputs — expressed as supplier deliveries, inventories and imports — continued to constrain production expansion, but to a lesser extent compared to July. The supplier deliveries index indicated deliveries slowed at a slower rate in August, while the inventories index grew at a slower rate as well. The imports index expanded in August for the third consecutive month, but at a slower rate compared to July. The prices index increased for the 27th consecutive month, at a much slower rate compared to July.
“Of the six biggest manufacturing industries, five — petroleum and coal products; transportation equipment; computer and electronic products; machinery; and food, beverage & tobacco products — registered moderate-to-strong growth in August.
“Manufacturing performed well for the 27th straight month. With supplier delivery performance recording its fourth straight month of improvement, price increase growth slowing significantly for the second consecutive month, hiring and total employment both positive and expanding and lead times easing across all three categories of purchasing activity, the sector is at or approaching supply/demand equilibrium,” Fiore said.
