ISM Manufacturing PMI — August 2024
Headline: The Manufacturing PMI rose 0.4 points to 47.2, but remained in contraction for a fifth consecutive month; the pace of contraction slowed from July. The reading was below the trailing six-month average of 48.6, and within the prior six-month range of 46.8–50.3. At 47.2, it remained below the manufacturing breakeven of 50 but above the 42.5 threshold associated with broader economic contraction, consistent with an overall economy that is still growing.
Sub-indices:
| Index | Level | Prior | Change | Direction | vs 6-mo |
|---|---|---|---|---|---|
| New Orders | 44.6 | 47.4 | -2.8 | Contracting | 6-mo low |
| Production | 44.8 | 45.9 | -1.1 | Contracting | 6-mo low |
| Employment | 46.0 | 43.4 | +2.6 | Contracting | below avg (47.6) |
| Supplier Deliveries | 50.5 | 52.6 | -2.1 | Slowing | above avg (50.0) |
| Inventories | 50.3 | 44.5 | +5.8 | Growing | 6-mo high |
| Customers' Inventories | 48.4 | 45.8 | +2.6 | Too Low | 6-mo high |
| Prices | 54.0 | 52.9 | +1.1 | Increasing | below avg (55.2) |
| Backlog of Orders | 43.6 | 41.7 | +1.9 | Contracting | below avg (44.0) |
| New Export Orders | 48.6 | 49.0 | -0.4 | Contracting | 6-mo low |
| Imports | 49.6 | 48.6 | +1.0 | Contracting | below avg (51.0) |
Key moves:
- New Orders fell to a six-month low of 44.6, while Production also reached a six-month low of 44.8.
- Inventories rose 5.8 points to 50.3, a six-month high and a move from contraction to growth.
- Customers’ Inventories reached a six-month high of 48.4 while remaining below 50 (“too low”); New Export Orders fell to a six-month low.
Insights:
- The inventory increase looks more involuntary than demand-led: manufacturers’ inventories crossed into growth as New Orders fell to a six-month low and Production weakened. That combination raises the risk of further production restraint if the buildup persists.
- Customers’ inventories remain too low at 48.4, which is normally supportive of future orders and re-stocking. However, the rise to a six-month high indicates that this tailwind has moderated as channel inventories move closer to adequate levels.
- The 0.4-point PMI improvement is a clear change-versus-direction divergence: activity improved at the margin, but the index remained below 50 and contracted for a fifth month. Employment showed the same pattern, improving 2.6 points to 46.0 while still signaling net manufacturing job losses.
- Supplier Deliveries remained above 50 at 50.5, indicating slower deliveries and some continued demand or supply-chain tightness, although the decline from 52.6 signals less pronounced slowing than in July.
- Forward production signals remain weak: New Orders are contracting faster, Backlog remains in contraction at 43.6 after 23 months, and New Export Orders are at a six-month low. Prices rose faster to 54.0, implying renewed input-cost pressure that could weigh on margins and goods disinflation, though the reading remains below its six-month average.
Breadth & prices: Five listed industries reported growth and none were listed as contracting. Input prices increased, with the Prices index rising to 54.0.
Takeaway: August’s report depicts a manufacturing cycle still under pressure, with six-month lows in orders and production outweighing the headline’s modest improvement. Low customer inventories offer some eventual re-order support, but the simultaneous inventory buildup, weak backlogs and rising input costs point to limited near-term upside for manufacturing output and margins.