U.S. manufacturing activity decelerated in August, with the Institute for Supply Management’s Purchasing Managers’ Index declining to 54.6 from 55.6 in July, according to data released on Tuesday. The reading, which remains above the 50 threshold indicating expansion, fell short of economists’ expectations of 55.2, as surveyed by Reuters.
The manufacturing sector, which contributes roughly 9.4% to the U.S. economy, has now expanded for 25 consecutive months. Growth has been supported by demand for artificial intelligence-related equipment, though the pace of expansion moderated in August. New orders, a leading indicator of future production, decreased to 53.7 from 56.7 in July, while the employment sub-index fell to 51.2 from 52.8, the latter having reached its highest level since August 2022.
Supply chain pressures persisted, with the supplier deliveries index rising to 59.3 from 58.9, a level consistent with slower delivery times. Input costs, as measured by the prices paid index, remained unchanged at 71.1, signaling that inflationary pressures in the manufacturing sector could linger. This follows a five-quarter streak of declining inventories, the longest such stretch since the Great Recession, reflecting cautious stockpiling amid uncertain demand.
The Federal Reserve will monitor these figures ahead of its next policy meeting, with investor attention also focused on Friday’s employment report, including nonfarm payrolls, for further clues on labor market conditions and potential monetary policy adjustments.
