The US manufacturing sector continued to expand in August, with an Institute for Supply Management survey pointing to a slight deceleration sequentially and S&P Global (SPGI) data indicating a steady growth rate.
The ISM's purchasing managers' index fell to 54.6 last month from 55.6 in July, but marked the eighth consecutive month of expansion, according to a Tuesday statement. July's reading was the highest for the index since May 2022. The consensus was for a 55.2 print for August in a Bloomberg poll. A reading above 50 indicates the manufacturing sector is generally expanding.
"Manufacturing is still expanding at a healthy pace, but the August details point to some loss of momentum after July's surge," TD Economics Senior Economist Vikram Rai said in a note. "Strong production and low customer inventories remain supportive, while weaker new orders, backlogs and imports suggest growth is likely to moderate rather than accelerate in the near term."
The new orders index declined to 53.7 in August from 56.7 the month prior, while production edged down to 58.3 from 58.5. The employment measure dropped to 51.2 from 52.8, while the prices gauge remained steady at 71.1, ISM data showed.
"Moderating demand growth complicates the otherwise strong inflation signal," Rai added. "Softer orders and employment point to some easing in demand-side pressure, but persistently elevated input costs and respondents' repeated focus on supply-chain challenges suggest that goods inflation could remain firm even as manufacturing growth slows."
Separately, S&P Global said its manufacturing PMI remained unchanged at 53.9 sequentially in August. Growth in production and order books eased amid elevated prices and "tight" supply conditions, largely due to the Middle East conflict and tariff uncertainty, the data provider said.
Firms created jobs last month at the fastest rate recorded so far this year, while input cost inflation eased further from May's peak to a five-month low, the report showed.
"Although purchasing activity and preproduction inventories increased further, manufacturers continued to report difficulties sourcing and receiving raw materials because of supply delays and price rises," S&P Global Market Intelligence Economist Usamah Bhatti said. "These pressures were commonly linked to the war in the Middle East, which has exacerbated existing supply and inflationary pressures from tariffs."
Firms' expectations for year-ahead output hit the highest level in three months, driven by optimism for an end to the US-Iran war and a smoother domestic policy environment, according to the report.
"Firms also noted that greater stability in conditions were likely to support business expansion and customer retention plans," Bhatti said.
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