The US ISM Manufacturing Index for August slightly declined, falling short of expectations, but remains near a four-year high.

In August, U.S. manufacturing activity expanded for the eighth consecutive month, with the pace of growth slowing only slightly from the fastest level in four years.

According to data released on Tuesday, the Institute for Supply Management (ISM) manufacturing index fell by 1 point to 54.6 in August, below the expected 55.2. Nevertheless, this is still the second-highest reading since 2022. An index above 50 indicates that the manufacturing sector is in an expansionary state.

The production index posted its second-best performance since the end of 2021. The new orders index, seen as a demand barometer, was the weakest since March, but still indicated expansion. The ISM manufacturing new orders index was 53.7, compared to an expected 57 and a previous value of 56.7.

Factory employment increased for the second consecutive month, though the pace slowed. The ISM manufacturing employment index was 51.2, with expectations at 52.5 and a previous value of 52.8.

However, factories are also facing a set of challenges, including energy price spikes caused by war and supply chain disruptions.

In August, factories were again confronted with high raw material prices and longer supplier delivery times. The ISM prices index held steady at 71.1, matching the lowest level since February.

In August, a total of 15 manufacturing industries reported growth, including basic metals, electrical equipment, and home appliances. The wood and chemical products industries reported contraction.

Since 2026, the momentum of the manufacturing sector has strengthened, reversing years of sluggishness. This is mainly due to resilient consumer demand, robust corporate investment, and government spending in the defense sector.

Susan Spence, Chair of the ISM Manufacturing Business Survey Committee, stated that in August, about 46% of surveyed companies reported price increases, down from half in July.

Selected ISM Industry Company Comments

Chemical Products Industry: "The current economic environment is quite frustrating; it is hindering otherwise positive business developments. We have launched excellent new products, but soaring prices caused by tariffs and conflict in the Strait of Hormuz make it hard to remain competitive. I worry that inflation triggered by these factors will reduce our customers' purchasing power and, in turn, drag down sales."

Computer and Electronic Products Industry: "The supply chain situation, especially in the electronics market, is experiencing a crisis that is larger and more complex than during and after the pandemic. This is mainly due to the demand for AI infrastructure, the uncertainty in global markets (oil and other critical materials) caused by war in the Middle East, as well as increasingly complex trade regulations."

Machinery Industry: "Prices for all commodities continue to rise. Suppliers point to the rapidly increasing costs of energy, steel, and labor. We continue to try to offset costs by adjusting product flows. To minimize the cost impact, we've shifted more product sourcing overseas."

Miscellaneous Manufacturing: "Feedback this month is similar to recent months: (1) Key commodities heavily consumed by AI are facing severe supply/price challenges; (2) There is great uncertainty about when the Iran conflict will end; (3) U.S. tariff policies are changing again. Despite these tensions, we remain focused on what we can control, and demand for our products remains strong."

Transportation Equipment Industry: "High steel and aluminum prices (affected by Section 232 tariffs) continue to challenge profitability. Many customers’ top concern in communication is uncertainty regarding the USMCA agreement. In addition, our industry has suffered from anti-subsidy and anti-dumping measures, which have further increased equipment costs."