US 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 Thursday. 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.”
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.
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 US 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.
Select ISM Industry Comments
“Demand from customers is still strong, but much of that is because there is still fear of not getting product due to constraints. They are stocking up.” – Computer & Electronics Products
“Sales in target business softening month-over-month, down 12 percent by revenue. Inventory days are increasing.” – Chemicals Products
“Strong sales continue. The impact of the chip shortage is slowing.” – Transportation Equipment
“Supply in most groups is slowly increasing, but demand appears to be outpacing — causing pricing to either stabilize or increase.” – Petroleum & Coal Products
“Overall, I have seen much improvement in the availability of raw materials. However, trucking issues continued, and production capacity within some industries remains tight.” – Nonmetallic Minerals Products
“Demand is softening; however, we are continuing to produce to replenish inventory.” – Primary Metals
“Orders are still strong through the end of the year, but there is a feeling that customers may start pulling back on orders, either cancelling them or pushing them into 2023.” – Plastics & Rubber Products
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.