News

In August, the U.S. manufacturing sector contracted for the sixth consecutive month but at a slower pace than the prior month, with the ISM Manufacturing^® PMI increasing to 48.7% from 48.0% in July. Two of the demand indicators improved in August, with the New Orders and New Export Orders Indexes rising to 51.4% and 47.6%, respectively. Meanwhile, the Backlog of Orders and Imports Indexes contracted at a faster pace, falling to 44.7% and 46.0%, respectively. On the other hand, the Inventories Index (49.4%) contracted at a slightly slower pace, while the Production Index returned to negative territory after growing in July, falling from 51.4% to 47.8%.

The New Orders Index expanded after six consecutive months of contraction, rising 4.3 percentage points from July. The index hasn’t shown consistent growth since a 24-month streak of expansion ended in May 2022. Of the six-largest manufacturing sectors, two—food, beverage and tobacco products and computer and electronic products— reported an increase in new orders. Despite the index’s expansion, respondents continued to note concern about near-term demand, due primarily to tariffs and uncertainty.

The New Export Orders Index contracted for the sixth consecutive month but at a slightly slower pace, 1.5 percentage points higher than July. The continued contraction is likely indicative of dampened demand amid ongoing trade tensions. Meanwhile, the Imports Index contracted for the fifth consecutive month and at a faster rate, down 1.6 percentage points to 46.0% in August. Imports continue to contract as tariff pricing results in lower demand compared to prior months.

The Employment Index contracted for the seventh consecutive month but at a slightly slower pace than the prior month, up 0.4 percentage points from July to 43.8%. Of the six-largest manufacturing sectors, none reported increased employment. Companies continued to reduce headcounts through layoffs and attrition, while opting for layoffs at an accelerating pace due to uncertainty around near- to mid-term demand. For every mention of hiring, four respondents noted reduced headcounts, a wide ratio from a historical standpoint.

The Prices Index decreased 1.1 percentage points to 63.7%, indicating prices for raw materials grew for the 11th straight month in August, but at a slower pace. The increase continues to be driven by the dramatic rise in steel and aluminum prices impacting the entire supply chain, as well as the tariffs applied to most imported goods. Roughly 33.5% of companies reported paying higher prices, down slightly from 35.4% in July but still up dramatically from 21% in January.