29 Sept 2025
The latest ISM Manufacturing PMI data for August indicates a complex economic landscape for the US manufacturing sector. While new orders showed growth after six months of contraction, overall production declined, and various industries faced challenges including rising costs and tariffs, compelling manufacturers to transfer these burdens to consumers.
The ISM Manufacturing PMI data for August was higher than the previous month but fell short of predictions, reflecting a nuanced economic picture where the broader economy maintained growth for 64 consecutive months after a brief contraction in April 2022.
New Orders experienced growth in August after six months of contraction, while the Production Index decreased by approximately 3.6 points from the prior month. The Price Index showed a 1.1-point reduction, marking a decline from the previous month, and the Employment Index indicated stable conditions with only a 0.4-point increase. The Supplier Deliveries Index registered growth, signifying slower deliveries.
US manufacturing activity contracted at a slower pace in August, despite an overall decrease in production, with the growth in new orders signaling an improvement compared to the preceding month. Two key demand indicators, New Orders and Exports, improved, whereas Customer Inventories and Backlog of Orders experienced slight contraction, with low customer inventories typically viewed positively for future production.
The input components of the report, including Supplier Deliveries, Inventories, Prices, and Imports, largely moved into contraction. While inventories showed minor improvement, they remained in contraction, and deliveries continued to be somewhat slow, with prices cooling slightly but still on a slower upward trend. Imports also continued their decline, and workforce management persisted over new hiring.
In August, seven industries reported growth, including Textile, Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Miscellaneous Manufacturing; and Primary Metals. Conversely, ten industries experienced contraction, namely Paper Products, Wood Products, Plastics & Rubber Products, Transportation Equipment, Furniture & Related Products, Machinery, Appliances & Electrical Components, Chemical Products, Fabricated Metal Products, and Computer & Electronic Products.
Food, Beverage & Tobacco Products are affected by tariffs on Brazilian imports and organic sugar quotas, increasing costs. Chemical Products suffer from decreased orders, financial uncertainties, and tariff-related doubts. Petroleum Products grapple with ongoing tariff instability. Computer & Electronic Products face disrupted planning, higher new product development costs due to sudden tariffs (e.g., 50% on Indian imports), increased material costs, and difficult sales. Machinery sales, particularly in construction, are down, relying on replacement sales, with finished goods costs rising due to tariffs. Transportation Equipment remains in contraction, worse than the 2008 recession, with no activity due to 100% tariffs and uncertainty, leading to high prices and low order volumes. Appliances & Electrical Components have implemented a second price increase. Wood Products contend with a weak domestic market, reduced consumer power from inflation, and decreased orders. Nonmetallic Mineral Products, used in housing construction, see large investments halted, with a potentially strong but unsustainable short-term market.
Across the manufacturing sector, demand and orders have decreased, while prices have risen, compelling producers to transfer some costs to consumers. The decline in production indicates that the sector continues to experience stagnation or recession, with the factory output index falling into contraction for the first time in three months. US manufacturers face conflicting trends, battling higher costs from tariffs while also benefiting from strong business investments and some consumer demand, ultimately remaining under pressure that is passed on to consumers.
Ultimately, manufacturers are under pressure and are forced to pass this pressure onto consumers, highlighting the challenges of decreased demand, rising prices, and tariff-related costs.
| Industry | Performance | Key_Challenges | Impact |
|---|---|---|---|
| Food, Beverage & Tobacco Products | Growing | 50% tariff on Brazilian imports, USDA organic sugar quotas | Increased costs for organic sugar and related products. |
| Chemical Products | Contracting | Decreased orders, financial uncertainties (2020-2025), tariff uncertainties | Worsened financial expectations. |
| Petroleum & Coal Products | Growing | Unstable tariffs | Ongoing uncertainty regarding costs and planning. |
| Computer & Electronic Products | Contracting | Tariffs (e.g., 50% on Indian imports), disrupted planning, high new product development costs | Increased material costs, need for price review, difficult sales. |
| Machinery | Contracting | Especially construction/housing, tariffs | Decreased new sales, reliance on replacement sales, increased finished goods costs. |
| Transportation Equipment | Contracting | 100% tariff increase, uncertainty | Worse than 2008 recession, minimal activity, high prices, very low order volumes. |
| Appliances & Electrical Components | Contracting | Rising costs | Implemented a second price increase. |
| Wood Products | Contracting | Weak domestic market, inflation, reduced consumer power | Decreased orders. |
| Nonmetallic Mineral Products | Growing | Stalled large investments, housing construction market volatility | Short-term market strength is unsustainable and uncertain. |
| Manufacturing Sector (Overall) | Contracting | Decreased demand/orders, rising costs, tariffs | Manufacturers forced to pass costs to consumers, production decline, stagnation. |
