The U.S. manufacturing sector grappled with ongoing challenges in August 2023, as detailed in the ISM Manufacturing Report On Business. The Manufacturing PMI registered at 47.6%, marking the 10th consecutive month of contraction—a trend initiated in June 2022. None of the five subindexes contributing to the Manufacturing PMI showed signs of growth. Nevertheless, three of the six major manufacturing industries reported growth.
The New Orders Index, a crucial Manufacturing PMI component, contracted for the 12th consecutive month, recording 46.8%—a 0.5 percentage point drop from July's 47.3%. Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that of the six largest manufacturing sectors, only Transportation Equipment reported increased new orders. Although new order levels declined faster than in July, production remained steady month-to-month, with a more relaxed backlog contraction. This suggests that companies are adapting to new demand forecasts for the remainder of the year.
A notable benchmark for the New Orders Index is above 52.7%, typically indicative of an increase in the Census Bureau's manufacturing orders. In August, four manufacturing industries achieved growth in new orders: Nonmetallic Mineral Products, Textile Mills, Paper Products, and Transportation Equipment. In contrast, nine industries reported a decline in new orders in August, including Electrical Equipment, Appliances & Components, Furniture & Related Products, and Petroleum & Coal Products, among others.
Despite the continued contraction signaled by the Manufacturing PMI, the U.S. manufacturing sector exhibits resilience and adaptability in the face of persisting challenges. “It feels like we’re moving toward stability,” said Timothy R. Fiore, Chair, Manufacturing Business Survey Committee.
More about the ISM Report On Business: The index is based on a survey of executives in 18 industries. The PMI is considered a leading economic indicator and a barometer of where manufacturing is headed. An index reading above 50% indicates economic expansion, while below 50% shows contraction.
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