ISM: Manufacturing Contracts for 10th Consecutive Month in August

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.


  • “Further reductions in customer orders due to the economic situation and also their working down of own inventories. Backlog is dwindling, but still showing robust revenue.” [Computer & Electronic Products]
  • “Demand still weak. Customer inventories are getting depleted; however, we are not seeing a real uptick in demand. General supply conditions are softening.” [Chemical Products]
  • “Still seeing a slowdown in orders. We’re continuing to ship to max capacity, with supply constraints still a real part of our day-to-day business operations.” [Transportation Equipment]
  • “Customer orders have softened. This is likely due to customers’ increased confidence in the supply chain, (which) has them reducing their inventories. Customers are also being pinched with higher interest rates. Additionally, consumers are feeling their purchasing power eroded by stubbornly high inflation, so they are purchasing less.” [Food, Beverage & Tobacco Products]
  • “Fourth quarter orders falling short of projection and indicating a slowdown in customer demand, though the first quarter forecast remains solid. Unclear if this is an inventory correction. Logistics stabilized and costs are matching 2019. Shortages limited to only a few items now, but suppliers are hesitant to add or replace labor needed in light of slowing demand.” [Fabricated Metal Products]
  • “General slowdown in business at the end of the third quarter. For capital equipment additions, our customers are buying only what they need for specific jobs and not adding any capital fleet material for potential future work.” [Machinery]
  • “There is additional softening in the market. Customers are hesitant to provide extended forecasts with today’s economic uncertainty.” [Electrical Equipment, Appliances & Components]
  • “Business continues to remain strong with sales and profits both ahead of plan. The bookings were below what we planned, but that was expected due to fewer working days and summer vacations.” [Miscellaneous Manufacturing]
  • “The manufacturing sector continues to be slow, and the low market prices make it difficult to stay profitable. On the positive side, laborers are showing enthusiastic employment interest. Rising energy and fuel prices are of concern to our company.” [Paper Products]
  • “Business is beginning to improve moderately. Still well below 2022 levels, but it appears that the ‘great inventory rebalancing’ is finally coming to fruition.” [Plastics & Rubber Products]
  • “Automotive volume remains strong in preparation for the United Auto Workers’ potential strike at Ford, General Motors and Stellantis. Contingency plans in place for sub-tiers. Continue to have issues recruiting general labor employees. Operational efficiency suffering due to a lack of human resources. Order book remains strong and ahead of 2022.” [Primary Metals]
  • “(The Federal Reserve’s) actions to increase borrowing costs has dampened demand for residential investment. Recently, this slowdown plateaued somewhat, with demand stabilizing. The outlook for 2024 remains uncertain, and we continue to be cautious about building inventories.” [Wood Products]
August 2023
Index Series







Direction Rate of
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.

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