August manufacturing PMI falls to 54.6 as supply chain constraints persist
Key Takeaways
- •The ISM Manufacturing PMI fell to 54.6 in August from July’s 55.6, but still indicated continued expansion.
- •New orders expanded for an eighth month, though the index dropped to 53.7 and backlog orders also eased.
- •Manufacturing employment remained in expansion at 51.2 after first turning positive in July.
- •The Logistics Managers’ Index showed transportation capacity remained tight, even as the rate of contraction slowed.
- •The ISM prices index held at 71.1, signaling persistent inflation in raw materials for a 23rd straight month.
U.S. manufacturing activity remained supportive of freight demand for an eighth consecutive month in August, although the pace of expansion eased from July. Growth moderated in several key components, including new orders, while respondents’ comments suggested some demand and inventory decisions may have been influenced by tariff implementations earlier this summer.
A survey of manufacturing supply executives returned a reading of 54.6 for August, down 1 point from July, which was the highest level recorded since May 2022. Economists had expected a 55.2 reading for the month.
A reading above 50 in the Institute for Supply Management’s Manufacturing PMI indicates expansion, while a reading below 50 indicates contraction. A sustained level above 47.5 signals that the overall economy is growing. The August reading was consistent with annualized real GDP growth of 2.4%, the Tuesday report said.
The new orders index, a leading indicator of future activity, also expanded for an eighth straight month. However, the August reading of 53.7 was 3 points below July. The backlog of orders index, at 51.8, remained in expansion territory but fell 3.2 points from the prior month, while production stayed elevated at 58.3.
Sentiment around new orders was less optimistic, with a 2-to-1 ratio of positive-to-negative comments, compared with 3.5-to-1 in July.
Customers’ inventories, at 42.8, remained “too low,” according to respondents, although the index rose 2.1 points sequentially. Manufacturing employment, at 51.2, remained in expansion territory after turning positive in July for the first time in 33 months.
Transportation capacity remained tight in August, according to the Logistics Managers’ Index, which was also released Tuesday. The index printed at 40 for the month, still deep in contraction territory, but at a contraction rate that was 11.6 points slower than in July.
The ISM supplier deliveries index, which measures delivery times to manufacturing facilities, indicated slowing deliveries and potential supply chain constraints for a ninth straight month. The August reading came in at 59.3, up 40 basis points from July. This ISM subindex is inverted.
Among the 14 manufacturing industries tracked, no industries reported faster supplier deliveries in August than in July.
Inflation remained a major concern among respondents. The prices index held at 71.1, unchanged from July, and the latest reading suggests that raw materials prices increased for the 23rd consecutive month. The share of respondents reporting higher prices fell 4 points to 46.2%.
Overall, respondent sentiment was 42% positive and 58% negative in August. Pricing volatility was the most frequently cited concern in negative comments.
Public less-than-truckload carriers are due to report August tonnage trends in the coming days. The industrial economy typically accounts for roughly two-thirds of LTL revenue, making manufacturing activity and freight indicators like ISM and the Logistics Managers’ Index closely watched by shippers, carriers and logistics providers planning for capacity and procurement needs.
The ISM data are closely watched macroeconomic indicators that affect logistics, procurement and capacity planning.
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