Economic activity in the manufacturing sector grew in August, but apparel and textile producers did not join the upswing, U.S. supply executives said in the latest Institute for Supply Management (ISM) Manufacturing “Report On Business.”
The August Manufacturing Purchasing Managers Index (PMI) was unchanged from July’s 52.8 percent reading, said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee. A Manufacturing PMI above 48.7 percent, over a period of time, generally indicates the overall economy is expanding.
“This figure indicates expansion in the overall economy for the 27th month in a row after contraction in April and May 2020,” Fiore said. “For a second straight month, the Manufacturing PMI figure is the lowest since June 2020, when it registered 52.4 percent. The U.S. manufacturing sector continues expanding at rates similar to the prior two months. New order rates returned to expansion levels, supplier deliveries remain at appropriate tension levels and prices softened again, reflecting movement toward supply-demand balance.”
Ten manufacturing industries reported growth in August, while seven said business had contracted, including apparel, leather and allied products, and furniture and related products.
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According to Business Survey Committee respondents’ comments, companies continued to hire at strong rates in August, with few indications of layoffs, hiring freezes or head-count reductions through attrition. Price expansion eased dramatically in August. Fiore said coupled with lead times easing, this should bring buyers back into the market and improve new order levels.
The ISM Prices Index registered 52.5 percent in August, 7.5 percentage points lower compared to the July reading of 60 percent, indicating raw materials prices rose for the 27th consecutive month, but at a much slower rate. This is the first Prices Index reading below 60 percent since August 2020. A Prices Index above 52.6 percent is usually consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.
In August, eight of 18 industries reported paying increased prices for raw materials, including furniture and related products. Seven reported paying less for raw materials in August, topped by apparel, leather and allied products.
ISM’s New Orders Index increased 3.3 percent in August to 51.3 percent compared to 48 percent reported in July. This indicates that new order volumes returned to expansion after two months of contraction. A New Orders Index above 52.9 percent usually coincides with an increase in the Census Bureau’s series on manufacturing orders.
“Lead times remained elevated, but August saw a decrease across capital expenditures, raw materials and maintenance, repair and operating supplies,” Fiore said. “With prices easing, more buyers should resume order placements as we close the third quarter.”
Of the 18 manufacturing industries, six reported growth in new orders in August, led by textile mills, while eight reported a decline in new orders in August, including furniture and related products.
The Production Index registered 50.4 percent in August, 3.1 percent lower than July, indicating growth for the 27th consecutive month. An index above 52.4 percent is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
Nine industries reported a decrease in production in August, topped by apparel, leather and allied products and textile mills.
ISM’s Employment Index rose 4.3 percent to 54.2 percent in the month. August returned to expansion territory after three months of contraction. An Employment Index above 50.5 percent is usually consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
Fiore noted that labor management activity improved in August, with a larger share of comments saying hiring is getting easier, and among respondents whose companies were hiring, 18 percent expressed difficulty in filling positions, down from 35 percent in July. Turnover rates eased, with 33 percent of comments citing backfill and retirement issues, a decrease from 39 percent in July.
“Employment gains in August should translate into stronger expansion in production growth in September,” Fiore said.
Of 18 manufacturing industries, nine reported employment growth in August, including furniture and related products.
The delivery performance of suppliers to manufacturing organizations was slower in August, as the Supplier Deliveries Index registered 55.1 percent, down 0.1 percent from July. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower ones.
Four industries reported faster supplier deliveries in August compared to July, including furniture and related products.
The Inventories Index registered 53.1 percent in August, 4.2 percent lower than the prior month. An Inventories Index greater than 44.4 percent usually jives with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories.
Inventories in apparel, leather and allied products, textile mills and furniture and related products were flat compared to July.
ISM’s Customers’ Inventories Index was down 0.6 percent to 38.9 percent in August, indicating customers’ inventory levels were considered too low.
Three industries–apparel, leather and allied products; furniture and related products, and wood products–reported customers’ inventories as too high in August. The 11 industries reporting customers’ inventories as too low were led by textile mills.
ISM’s Backlog of Orders Index rose 1.7 percent to 53 percent in the month, indicating order backlogs expanded for the 26th straight month. Four industries reported lower backlogs in August, including furniture and related products.
ISM’s New Export Orders Index registered 49.4 percent in August, 3.2 percent below the July reading.
“Weakness in European economies and China still catching up after Covid-19 lockdowns continue to constrain new export orders and impact the index number,” Fiore said.
The six industries reporting a decrease in new export orders in August included furniture and related products.
ISM’s Imports Index fell 1.9 percent for the month to 52.5 percent. Fiore said, “Imports grew in August despite port congestion on the East Coast and containers not moving in the most efficient manner.”
The eight industries reporting growth in imports in August were led by textile mills.