The August ISM Manufacturing index was unchanged in August at 52.8, beating expectations for a pullback to 51.9.
New orders rose by 3.3 percentage points to 51.3, while new export orders fell by 3.2 percentage points to 49.4.
The backlog of orders sub-index came in at 53.0, rising 1.7 percentage points from July’s 51.3 print.
The production index fell 3.1 percentage points to 50.4 while the employment index rose 4.3 percentage points to 54.2. The employment index reversed a three month streak of sub-50 readings.
The supplier deliveries sub-index was virtually unchanged at 55.1 points (55.2 in July) indicating supplier delivery times expanded at their slowest rate since January 2020. The prices index fell 7.5 points to 52.5, reflecting another sharp slowdown in raw materials price growth.
10 of 18 manufacturing industries reported growth last month. Growth was led by Nonmetallic Mineral Products; Petroleum & Coal Products; Transportation Equipment; Computer & Electronic Products; Printing & Related Support Activities; and Plastics & Rubber Products.
Key Implications
A welcome upside surprise as the ISM index remained unchanged from July. Moreover, new orders sprung back firmly into growth territory in August after two months of contraction, with backlogs ticking up marginally. These developments reflect healthy demand in August helping support the economy – despite the contraction in new export orders.
Supply chain developments continue to trend in a positive direction. Supplier delivery times are no longer lengthening the way they were earlier in the year, and input price growth has slowed to its lowest pace since the summer of 2020, which should help to further cool inflationary pressures.
In the big picture, rising interest rates and widespread inflation have dented demand for manufactured goods. Looking forward, this trend is set to continue as the Fed moves rates higher to regain price stability. It’s not all bad news though for the manufacturing sector, as the upticks in employment and new orders, increasing backlogs, and fewer supply-side headwinds should help keep the manufacturing sector in expansionary territory in the coming months.
