TEMPE, Ariz. — Economic activity in the manufacturing sector contracted in August for the fifth consecutive month and the 21st time in the last 22 months, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee:

"The Manufacturing PMI registered 47.2 percent in August, up 0.4 percentage point from the 46.8 percent recorded in July. The overall economy continued to expand for the 52nd month after one month of contraction in April 2020. The New Orders Index remained in contraction territory, registering 44.6 percent, 2.8 percentage points lower than the 47.4 percent recorded in July."

Fiore continues, "While still in contraction territory, U.S. manufacturing activity contracted slower compared to last month. Demand continues to be weak, output declines and inputs stay accommodative. Demand slowing was reflected by the (1) New Orders Index dropping further into contraction, (2) New Export Orders Index contracting slightly faster, (3) Backlog of Orders Index remaining in strong contraction territory, and (4) Customers' Inventories Index at the 'just right' level."

"Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and election uncertainty. Production execution was down compared to July, putting additional pressure on profitability. Suppliers continue to have capacity, with lead times improving and shortages not as severe," says Fiore. 

The five manufacturing industries reporting growth in August are Primary Metals; Petroleum & Coal Products; Furniture & Related Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The 12 industries reporting contraction in August — in the following order — are: Textile Mills; Printing & Related Support Activities; Nonmetallic Mineral Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Wood Products; Machinery; Paper Products; Chemical Products; and Miscellaneous Manufacturing.

"High interest rates are curtailing consumer spending on large discretionary spending for furniture, cabinetry, flooring and decorative trim, which has affected our industry sales potential. At the same time, pent-up demand seems to be growing for housing and remodeling. Interest rate cuts may not happen soon enough to have an impact this year," says a Wood Products representative.