Economic activity in the manufacturing sector contracted in August for the 10th consecutive month following a 28-month period of growth, according to supply executives surveyed for the August Manufacturing ISM Report on Business.
The report was issued 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 47.6%, 1.2 percentage points higher than the 46.4% recorded in July. Regarding the overall economy, this figure indicates the ninth month of contraction after a 30-month period of expansion,” Fiore said. “The New Orders Index remained in contraction territory at 46.8%, 0.5 percentage point lower than the figure of 47.3% recorded in July. The Production Index reading of 50% is a 1.7-percentage point increase compared to July’s figure of 48.3%. The Prices Index registered 48.4%, up 5.8 percentage points compared to the July figure of 42.6%. The Backlog of Orders Index registered 44.1%, 1.3 percentage points higher than the July reading of 42.8%. The Employment Index registered 48.5%, up 4.1 percentage points from July’s reading of 44.4%.
“The Supplier Deliveries Index figure of 48.6% is 2.5 percentage points higher than the 46.1% recorded in July,” Fiore said. “This is the highest reading in the past 11 months. (Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.)
“The Inventories Index decreased by 2.1 percentage points to 44%; the July reading was 46.1%,” Fiore said. “The New Export Orders Index reading of 46.5% is 0.3 percentage point higher than July’s figure of 46.2%. The Imports Index remained in contraction territory, registering 48%, 1.6 percentage points lower than the 49.6% reported in July.”
“The U.S. manufacturing sector shrank again, but the uptick in the PMI indicates a slower rate of contraction,” Fiore said. “The August composite index reading reflects companies managing outputs appropriately as order softness continues, but the month-over-month increase is a sign of improvement. Demand eased again, with the 1) New Orders Index contracting at a slightly faster rate, 2) New Export Orders Index continuing in contraction territory, with minimal signs of improvement and 3) Backlog of Orders Index improving for the third straight month but remaining at low levels. The Customers’ Inventories Index reading indicated appropriate buyer/supplier tension, which is neutral to slightly positive for future production. Output/consumption (measured by the Production and Employment indexes) was positive, with a combined 5.8-percentage point upward impact on the Manufacturing PMI calculation. Panelists’ companies stabilized production compared to July and continued to manage head counts, primarily through attrition. Inputs — defined as supplier deliveries, inventories, prices and imports — continued to accommodate future demand growth. The Supplier Deliveries Index indicated faster deliveries for the 11th straight month, and the Inventories Index remained in contraction territory as panelists’ companies continued to mitigate inventories exposure. The Prices Index remained in ‘decreasing’ territory but increased a respectable 5.8 percentage points, signifying near price stability. Sentiment improved regarding manufacturing lead times, although they remain at elevated levels.
“Of the six biggest manufacturing industries, three — transportation equipment; food, beverage and tobacco products; and petroleum and coal products — registered growth in August,” Fiore said.
“Demand remains soft, but production execution is consistent with new, reduced output levels based on panelists’ companies order books,” Fiore said. “Suppliers continue to have capacity. Prices are generally stable. Sixty-two percent of manufacturing gross domestic product (GDP) contracted in August, down from 92% in July, a positive trend for the economy. Additionally, the share of manufacturing GDP registering a composite PMI calculation at or below 45% — a good barometer of overall manufacturing weakness — was 15% in August, compared to 25% in July and 44% in June, a clear positive.”
The five manufacturing industries that reported growth in August were: printing and related support activities; transportation equipment; food, beverage and tobacco products; petroleum and coal products; and miscellaneous manufacturing.
The 13 industries reporting contraction in August — in the following order — were: apparel, leather and allied products; furniture and related products; plastics and rubber products; primary metals; fabricated metal products; textile mills; electrical equipment, appliances and components; chemical products; computer and electronic products; paper products; wood products; nonmetallic mineral products and machinery.
WHAT RESPONDENTS ARE SAYING
MANUFACTURING AT A GLANCE August 2023 |
||||||
Index | Series Index Aug |
Series Index Jul |
Percentage
Point Change |
Direction | Rate of Change |
Trend* (Months) |
Manufacturing PMI® | 47.6 | 46.4 | +1.2 | Contracting | Slower | 10 |
New Orders | 46.8 | 47.3 | -0.5 | Contracting | Faster | 12 |
Production | 50.0 | 48.3 | +1.7 | Unchanged | From Contracting | 1 |
Employment | 48.5 | 44.4 | +4.1 | Contracting | Slower | 3 |
Supplier Deliveries | 48.6 | 46.1 | +2.5 | Faster | Slower | 11 |
Inventories | 44.0 | 46.1 | -2.1 | Contracting | Faster | 6 |
Customers’ Inventories | 48.7 | 48.7 | 0.0 | Too Low | Same | 3 |
Prices | 48.4 | 42.6 | +5.8 | Decreasing | Slower | 4 |
Backlog of Orders | 44.1 | 42.8 | +1.3 | Contracting | Slower | 11 |
New Export Orders | 46.5 | 46.2 | +0.3 | Contracting | Slower | 3 |
Imports | 48.0 | 49.6 | -1.6 | Contracting | Faster | 10 |
OVERALL ECONOMY | Contracting | Slower | 9 | |||
Manufacturing Sector | Contracting | Slower | 10 |
Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.
*Number of months moving in current direction.
Like this story? Begin each business day with news you need to know! Click here to register now for our FREE Daily E-News Broadcast and start YOUR day informed!