Factories Grew Again in August, More Slowly. The Prices Index Did Not Move at All.

American manufacturing expanded for an eighth straight month in August, at a slower pace. The Institute for Supply Management's Manufacturing PMI came in at 54.6%, a point below July's 55.6%, in a release issued on September 1. Anything above 50% indicates expansion, so the sector is still growing; the drop is in how fast.

The Manufacturing PMI registered 54.6 percent in August, 1 percentage point below the July figure of 55.6 percent.

The full sub-index table

• New Orders: 53.7% in August, from 56.7% in July — down 3.0 points.
• Production: 58.3%, from 58.5% — down 0.2 points.
• Employment: 51.2%, from 52.8% — down 1.6 points.
• Supplier Deliveries: 59.3%, from 58.9% — up 0.4 points.
• Inventories: 50.6%, from 51.2% — down 0.6 points.
• Customers' Inventories: 42.8%, from 40.7% — up 2.1 points.
• Prices: 71.1%, from 71.1% — unchanged.
• Backlog of Orders: 51.8%, from 55.0% — down 3.2 points.
• New Export Orders: 53.2%, from 53.0% — up 0.2 points.
• Imports: 52.5%, from 55.7% — down 3.2 points.

Where the slowdown actually is

The three largest declines are New Orders, Backlog of Orders and Imports, each about three points. That is a coherent picture rather than three separate ones. New orders are what comes in the door; backlog is what has come in and not yet been worked through; imports are largely the inputs bought to work through it. All three easing together says demand softened in August rather than that supply broke down.

Production, at 58.3%, is the reading that did not follow. Factories kept output near July's level while orders and backlogs fell, which is what a sector does when it is working through work already booked. If new orders stay near 53.7% or fall further, production is the index that has to give next.

Note also the direction of Supplier Deliveries, which rose to 59.3%. On ISM's convention this index is inverted: a higher number means slower deliveries. Deliveries getting slower while orders fall is unusual, and it points at supply-side friction rather than at demand.

The prices index that did not move

Prices came in at 71.1%, exactly where it was in July. That is a high reading — it means a large majority of purchasing managers reported paying more, not less — and it has now held at that level for two months while the demand indexes fell. Cost pressure that does not ease when orders ease is a different problem from cost pressure driven by a demand boom.

Respondents in the release pointed at specific sources. One cited "tariffs and the conflict in the Strait of Hormuz" as drivers of inflation. Another described the electronics supply chain as "going through another crisis" driven mainly by AI infrastructure demand and uncertainty. A third reported that "steel prices continue to climb as supply diminishes, aluminum is rising after dropping."

Breadth

Fifteen manufacturing industries reported growth in August: Primary Metals; Electrical Equipment, Appliances and Components; Miscellaneous Manufacturing; Textile Mills; Furniture and Related Products; Nonmetallic Mineral Products; Paper Products; Transportation Equipment; Fabricated Metal Products; Petroleum and Coal Products; Printing and Related Support Activities; Computer and Electronic Products; Plastics and Rubber Products; Machinery; and Food, Beverage and Tobacco Products. Two reported contraction: Wood Products and Chemical Products.