Manufacturing Growth Holds Steady as Inflation Pressures Ease
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U.S. manufacturing growth steadied in August at the slowest pace in over two years, while a measure of materials costs declined for a fifth-straight month in a welcome sign inflationary pressures are abating.
The Institute for Supply Management’s gauge of factory activity held at 52.8, matching the lowest level since June 2020, according to data released Sept. 1. Readings above 50 indicate expansion, and the latest figure compared with a median projection of 51.9 in a Bloomberg survey of economists.
“Sentiment remained optimistic regarding demand, with five positive growth comments for every cautious comment,” said Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee. Still, “Panelists continue to express unease about a softening economy.”
August #Manufacturing @ISM® Report On Business®: The PMI® of 52.8% matched the prior month’s figure, but slower prices growth, improved #employment and shorter lead times should bode well for future new orders and production. https://t.co/F9FYnxLEJL #ISMPMI #economy #supplychains — Institute for Supply Management (@ism) September 1, 2022
Ten manufacturing industries reported growth for the month, led by mineral products, petroleum and transportation equipment.
The figures suggest sustained yet moderate growth in manufacturing and some additional easing in supply constraints. The industry is so far faring better than its counterparts in Europe and Asia, where the war in Ukraine and economic slowdown in China are leading to shrinking factory activity.
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A weaker global economy and recession concerns have led to pullbacks in prices for oil, metals and other commodities. As a result, the ISM’s U.S. measure of prices paid for materials used in the production process fell 7.5 points to the lowest level since June 2020. The gauge plunged 18.5 points in the prior month.
The ISM results follow regional reports painting a somewhat mixed picture of the sector. A measure of New York state factory activity plunged in August by the second-most in data back to 2001. However, gauges of manufacturing in the Philadelphia and Chicago areas improved or held up.
Supplier delivery times lengthened slightly, the ISM figures showed, yet at the slowest pace since before the pandemic. And a measure of factory inventories fell 4.2 points to a four-month low of 53.1, showing stockpiles were being rebuilt at a slower pace.
The ISM’s employment gauge, meantime, rose to a five-month-high of 54.2, suggesting more manufacturers were adding to payrolls in August.
— With assistance from Chris Middleton.