According to the August 2022 manufacturing Institute for Supply Management Report On Business, economic activity in the manufacturing sector grew in August, with the overall economy achieving a 27th consecutive month of growth, but wood products and furniture and related products were two of seven industry sectors that contracted. 

The report was issued Sept. 1 by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee:

The August Manufacturing PMI registered 52.8 percent, the same reading as recorded in July. This figure indicates expansion in the overall economy for the 27th month in a row after a contraction in April and May 2020. For a second straight month, the Manufacturing PMI figure is the lowest since June 2020, when it registered 52.4 percent. 

The New Orders Index registered 51.3 percent, 3.3 percentage points higher than the 48 percent recorded in July. The Production Index reading of 50.4 percent is a 3.1-percentage point decrease compared to July's figure of 53.5 percent. The Prices Index registered 52.5 percent, down 7.5 percentage points compared to the July figure of 60 percent; this is the index's lowest reading since June 2020 (51.3 percent).

The Backlog of Orders Index registered 53 percent, 1.7 percentage points above the July reading of 51.3 percent. After three straight months of contraction, the Employment Index expanded at 54.2 percent, 4.3 percentage points higher than the 49.9 percent recorded in July. The Supplier Deliveries Index reading of 55.1 percent is 0.1 percentage point lower than the July figure of 55.2 percent. The Inventories Index registered 53.1 percent, 4.2 percentage points lower than the July reading of 57.3 percent. The New Export Orders Index contracted at 49.4 percent, down 3.2 percentage points compared to July's figure of 52.6 percent. The Imports Index remained in expansion territory at 52.5 percent, but 1.9 percentage points below the July reading of 54.4 percent.

"The U.S. manufacturing sector continues expanding at rates similar to the prior two months,” Fiore said,. New order rates returned to expansion levels, supplier deliveries remain at appropriate tension levels and prices softened again, reflecting movement toward supply/demand balance. According to Business Survey Committee respondents' comments, companies continued to hire at strong rates in August, with few indications of layoffs, hiring freezes or head-count reductions through attrition," he said.

Twelve percent of panelists' comments reflect growing worries about total supply chain inventory. Demand increased, with the (1) New Orders Index returning to expansion, (2) Customers' Inventories Index remaining at a low level, retreating slightly compared to July and (3) Backlog of Orders Index increasing its rate of growth. Consumption (measured by the Production and Employment indexes) improved during the period, with a combined positive 1.2-percentage point impact on the Manufacturing PMI calculation. The Employment Index returned to expansion after three months of contraction, and the Production Index lost ground but remained in growth territory. With the gains in hiring and fewer supplier delivery issues, production expansion should improve in September. Inputs — expressed as supplier deliveries, inventories and imports — continued to constrain production expansion, but to a lesser extent compared to July. The Supplier Deliveries Index indicated deliveries slowed at a slower rate in August, while the Inventories Index grew at a slower rate as well. The Imports Index expanded in August for the third consecutive month, but at a slower rate compared to July. The Prices Index increased for the 27th consecutive month, at a much slower rate compared to July.

"Of the six biggest manufacturing industries, five — Petroleum & Coal Products; Transportation Equipment; Computer & Electronic Products; Machinery; and Food, Beverage & Tobacco Products — registered moderate-to-strong growth in August.

"Manufacturing performed well for the 27th straight month. With (1) supplier delivery performance recording its fourth straight month of improvement, (2) price increase growth slowing significantly for the second consecutive month, (3) hiring and total employment both positive and expanding and (4) lead times easing across all three categories of purchasing activity, the sector is at or approaching supply/demand equilibrium," said Fiore

Production
The Production Index registered 50.4 percent in August, 3.1 percentage points lower than the July reading of 53.5 percent, indicating growth for the 27th consecutive month. "Of the top six industries, three — Petroleum & Coal Products; Transportation Equipment; and Machinery — expanded in August. Materials availability and the labor pool continue to recover; with quits easing and supplier deliveries improving, production should expand at a faster rate in September," says Fiore. An index above 52.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The six industries reporting growth in production during the month of August — listed in order — are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Transportation Equipment; Machinery; and Plastics & Rubber Products. The nine industries reporting a decrease in production in August — in the following order — are: Apparel, Leather & Allied Products; Textile Mills; Wood Products; Paper Products; Primary Metals; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Fabricated Metal Products.

Nine manufacturing industries reported slower supplier deliveries in August, in the following order: Nonmetallic Mineral Products; Primary Metals; Computer & Electronic Products; Miscellaneous Manufacturing; Paper Products; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; and Fabricated Metal Products. Four industries reported faster supplier deliveries in August as compared to July: Wood Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; and Plastics & Rubber Products

New export orders
ISM's New Export Orders Index registered 49.4 percent in August, 3.2 percentage points below the July reading of 52.6 percent. "The New Export Orders Index contracted in August after being in expansionary territory for 25 consecutive months. Weakness in European economies and China still catching up after COVID-19 lockdowns continue to constrain new export orders and impact the index number. Of the six big industry sectors, two — Computer & Electronic Products; and Food, Beverage & Tobacco Products — expanded," says Fiore.
Three industries reported growth in new export orders in August: Plastics & Rubber Products; Computer & Electronic Products; and Food, Beverage & Tobacco Products. The six industries reporting a decrease in new export orders in August — in the following order — are: Wood Products; Furniture & Related Products; Primary Metals; Fabricated Metal Products; Chemical Products; and Machinery. Eight industries reported no change in exports in August as compared to July.

The full text version of the Manufacturing ISM Report On Business is posted on ISM's website at www.ismrob.org.