U.S. ISM Manufacturing Index Holds Steady in August

Factory sector growth is positive, but subdued. The Composite Index of factory sector activity reported by the Institute for Supply Management (ISM) was unchanged m/m during August at 52.8. The index remained below the March 2021 peak of 63.7 and stood at the lowest level since June 2020. A reading of 52.0 had been expected in the Action Economics Forecast Survey.

Showing improvement last month was the new orders index. It rose to 51.3 from 48.0 in July and stood at the highest level in three months. It remained down, however, from a high of 67.4 in December 2020. The employment reading surged to 54.2 last month from 49.9 in July. It was the highest level since March. The rise followed three consecutive months of readings below 50 which signaled declines in factory sector employment. A slightly lessened 19.3% (NSA) of respondents reported more hiring but a greatly reduced 12.4% reported a decline. Also declining, the supplier delivery index eased to 55.1 from 55.2 in July and stood below the high of 78.8 in May of last year.

Continuing its steep decline, the production series fell to 50.4 last month from 53.5 in July. The reading indicated the slowest rate of production increase since May 2020 and was below a high of 66.4 in March of last year. A greatly lessened 17.6% of respondents reported higher production while a steady 17.0% reported a decline. The inventories index weakened sharply to 53.1 from 57.3 and stood at the lowest level in four months.

Pricing power in the factory sector deteriorated significantly during August. The prices index declined to 52.5 (NSA) last month from 60.0 in July. It was the lowest reading since June 2020 and down from a high of 92.1 in June 2021. A greatly lessened 31.7% of respondents reported higher prices while a significantly increased 26.7% reported price declines. That compared to virtually none this past March.

In other series, the export reading weakened to 49.4 last month from 52.6 in July, but remained below the reading of 57.1 in February. The import measure eased to 52.5 in August. It remained above a low of 48.7 in May. The orders backlog measure rose slightly to 53.0 but remained down from a high of 70.6 in May of last year.

The ISM figures are based on responses from over 400 manufacturing purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's USECON database; further detail is found in the SURVEYS database. The expectations number is available in Haver's AS1REPNA database.

Returning to Price Stability from Cleveland Fed President Loretta J. Mester is available here.