The ISM Manufacturing Index marginally improved in August, rising to 47.2 and just short of expectations of a 47.5 print. As in July, only five industries reported growth for the month, but as some larger industries grew, a smaller share of manufacturing GDP shrank relative to last month (65% vs. 86% in July).
Demand continued to slow as the new orders index fell to 44.6, new export orders remained in contraction, and backlogs continued to shrink.
Output conditions remain subdued, as both the employment and production indexes remain in contraction, despite a slight uptick in the former.
Price pressures picked up again last month, with the index rising to 54.0, now well above the 52.8 reading that is typically associated with an increase in the Producer Price Index for Intermediate Materials.
Key Implications
The takeaway here is that the challenging conditions persist for the manufacturing sector. New demand continues to contract, and weakness remains broad based.
Despite the softness in the report there are reasons for optimism. The Fed is set to begin cutting interest rates, a key impediment to the sector’s growth prospects. For manufacturers, the light at the end of the tunnel is starting to emerge, but with the pace of cuts likely to be gradual, the recovery will likely proceed in fits and starts.
.){kind=link}