TEMPE, Ariz. — Economic activity in the manufacturing sector contracted in August for the sixth consecutive month, following a two-month expansion preceded by 26 straight months of contraction, say the nation's supply executives in the latest ISM Manufacturing PMI Report.
The report was issued Tuesday by Susan Spence, MBA, Chair of the Institute for Supply Management Manufacturing Business Survey Committee.
"The Manufacturing PMI registered 48.7 percent in August, a 0.7-percentage point increase compared to the 48 percent recorded in July. The overall economy continued in expansion for the 64th month after one month of contraction in April 2020. (A Manufacturing PMI above 42.3 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index indicated growth in August following a six-month period of contraction; the figure of 51.4 percent is 4.3 percentage points higher than the 47.1 percent recorded in July. The August reading of the Production Index (47.8 percent) is 3.6 percentage points lower than July's figure of 51.4 percent. The Prices Index remained in expansion (or 'increasing') territory, registering 63.7 percent, down 1.1 percentage points compared to the reading of 64.8 percent reported in July. The Backlog of Orders Index registered 44.7 percent, down 2.1 percentage points compared to the 46.8 percent recorded in July. The Employment Index registered 43.8 percent, up 0.4 percentage point from July's figure of 43.4 percent.
"The Supplier Deliveries Index indicated slower delivery performance after one month in 'faster' territory, which was preceded by seven consecutive months in expansion (or 'slower') territory. The reading of 51.3 percent is up 2 percentage points from the 49.3 percent recorded in July. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 49.4 percent, up 0.5 percentage point compared to July's reading of 48.9 percent.
"The New Export Orders Index reading of 47.6 percent is 1.5 percentage points higher than the reading of 46.1 percent registered in July. The Imports Index registered 46 percent, 1.6 percentage points lower than July's reading of 47.6 percent.
"In August, U.S. manufacturing activity contracted at a slightly slower rate, with new orders growth the biggest factor in the 0.7-percentage point gain of the Manufacturing PMI. However, since production contracted at a rate nearly equal to the expansion in new orders, the Manufacturing PMI® increase was nominal.
"Two of the four demand indicators improved, with the New Orders and New Export Orders indexes showing gains, while the Customers' Inventories and Backlog of Orders indexes contracted at slightly faster rates. A 'too low' status for the Customers' Inventories Index is usually considered positive for future production.
"Regarding output, the Production Index returned to contraction and the Employment Index edged up slightly, as panelists indicated that managing head counts is still the norm at their companies, as opposed to hiring.
"Finally, inputs (defined as supplier deliveries, inventories, prices and imports), on net, declined further into contraction territory. The Inventories Index improved slightly but is still in contraction territory, the Supplier Deliveries Index indicated slower deliveries, and prices continued to increase, but at a slower rate. The Imports Index moved further into contraction.
"Looking at the manufacturing economy, 69 percent of the sector's gross domestic product (GDP) contracted in August, down from 79 percent in July. Four percent of GDP is strongly contracting (registering a composite PMI® of 45 percent or lower), down from 31 percent in July. The share of sector GDP with a PMI® at or below 45 percent is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, two (Food, Beverage & Tobacco Products; and Petroleum & Coal Products) expanded in August, compared to none in July."
The seven manufacturing industries reporting growth in August — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Miscellaneous Manufacturing; and Primary Metals. The 10 industries reporting contraction in August — in the following order — are: Paper Products; Wood Products; Plastics & Rubber Products; Transportation Equipment; Furniture & Related Products; Machinery; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; and Fabricated Metal Products.
WHAT RESPONDENTS ARE SAYING
- "A 50-percent tariff on imports from Brazil, combined with the U.S. Department of Agriculture's elimination of the specialty sugar quota, means certified organic cane sugar — and everything made with it — is about to get significantly more expensive." (Food, Beverage & Tobacco Products)
- "Orders across most product lines have decreased. Financial expectations for the rest of 2025 have been reduced. Too much uncertainty for us and our customers regarding tariffs and the U.S./global economy." (Chemical Products)
- "Tariffs continue to be unstable, with suppliers adding surcharges ranging between 2.6 percent to 50 percent." (Petroleum & Coal Products)
- "Tariffs continue to wreak havoc on planning/scheduling activities. New product development costs continue to increase as unexpected tariff increases are announced — for example, 50-percent duties on imports from India, and increases to all countries up from original 10 percent. Our materials/supplies are now rising in price, so our sell pricing is again being reviewed to ensure we keep a sustainable margin. Plans to bring production back into U.S. are impacted by higher material costs, making it more difficult to justify the return." (Computer & Electronic Products)
- "The construction industry, especially home building, is still at a lower level. With new construction at a low level, our new sales are impacted. We are mainly now relying on replacement business. Cost of goods sold is higher due to tariff-impacted goods." (Machinery)
- "Domestic sales remain flat but are down four percent from plan by unit volume [tariff pricing]. Export demand is falling as customers do not accept tariff impacts, which likely will require some production transfers out of the U.S. Supplier deliveries remain consistent with ocean shipping costs dropping significantly. Tariff costs have biggest financial impact but also costs of copper and of steel products." (Fabricated Metal Products)
- "The trucking industry continues to contract. Our backlog continues to shrink as customers continue to hold off on buying new equipment. This current environment is much worse than the Great Recession of 2008-09. There is absolutely no activity in the transportation equipment industry. This is 100 percent attributable to current tariff policy and the uncertainty it has created. We are also in stagflation: Prices are up due to material tariffs, but volume is way off." (Transportation Equipment)
- "Very tentative domestic market, with home building and remodeling not very active at all. Inflation, among other factors, is starting to impact consumer buying power, leading to negative signs for our order files. International markets are upended due to the unpredictability of on-again, off-again tariff activity." (Wood Products)
- "We've implemented our second price increase. 'Made in the USA' has become even more difficult due to tariffs on many components. Total price increases so far: 24 percent; that will only offset tariffs. No influence on margin percentage, which will actually drop. In two rounds of layoffs, we have let go of about 15 percent of our U.S. workforce. These are high-paying and high-skilled roles: engineers, marketing, design teams, finance, IT and operations. The administration wants manufacturing jobs in the U.S., but we are losing higher-skilled and higher-paying roles. With no stability in trade and economics, capital expenditures spending and hiring are frozen. It's survival." (Electrical Equipment, Appliances & Components)
- "There is still uncertainty in the construction market. Large expansions or investment are hampered by the unknown of costing and the economy. The markets we operate in can be strong short term, but there is an underlying feeling that has you questioning for how long." (Nonmetallic Mineral Products)
ISM Manufacturing PMI Report data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.
*Number of months moving in current direction.
