Firms’ Expectations Remain Positive Amid New Orders Increase
The S&P Global U.S. Manufacturing PMI was 53.0 in August, up considerably from the July reading of 49.8 and the highest reading since May 2022. New orders increased for the eighth consecutive month primarily as a result of domestic sales, with international sales declining slightly. Tariffs led to steep rises in both input and output costs in August, with input cost inflation accelerating at the steepest pace in the past three years, apart from June.
Amid worries over rising prices and supply constraints due to tariffs, finished stocks of goods rose to the greatest extent in more than a year. Meanwhile, stronger sales and a buildup of inventories resulted in production growth surging from July at the fastest pace in 13 months. Average lead times improved slightly in August, with delivery times shortening despite the influx of new orders.
Although tariffs continued to weigh on business confidence, firms are more hopeful than in July, with an anticipation that demand will improve in the year ahead. As manufacturers faced new orders and completed some existing orders in August, firms increased employment levels, also buoyed by optimism regarding future production. Nonetheless, capacity remained under pressure, resulting in backlogs of work rising in August at the steepest pace since September 2022.