U.S. Manufacturing Growth Slows in August but Freight Demand Remains Solid
U.S. manufacturing activity continued to support freight demand for an eighth consecutive month in August, though the pace of growth moderated compared with July. The latest survey of supply executives from the Institute for Supply Management (ISM) returned a reading of 54.6, down 1 percentage point from July’s level, which had been the highest since May 2022. Economists had anticipated a 55.2 figure for August.
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According to the ISM report, a reading above 50 signals expansion, while a sustained level above 47.5 indicates overall economic growth. The August reading was consistent with annualized real GDP growth of 2.4%, as stated in the report.
The new orders index, a gauge of future activity, also expanded for an eighth straight month, but at 53.7 it was 3 points below July’s level. The backlog of orders index remained positive at 51.8, though it fell 3.2 points sequentially as production stayed elevated at 58.3. Sentiment around new orders was less optimistic, with a 2-to-1 ratio of positive-to-negative comments, compared with 3.5-to-1 in July.
Customers’ inventories remained too low at 42.8, but the index improved by 2.1 points from the prior month. Manufacturing employment turned positive in July for the first time in 33 months and remained positive in August, with a reading of 51.2.
Transportation capacity stayed tight in August, according to the Logistics Managers Index, also released on Tuesday. The index came in at 40, still deep in contraction territory, but the rate of contraction slowed by 11.6 points compared with July.
The ISM’s supplier deliveries index, which measures delivery times to manufacturing facilities, showed a slowdown in deliveries and potential supply chain constraints for a ninth consecutive month. The reading of 59.3 was up 40 basis points sequentially. Notably, none of the 14 manufacturing industries tracked reported faster supplier deliveries in August compared with July.
Inflation remained a key concern among respondents, with the prices index holding at 71.1, unchanged from July. The latest reading implies raw materials prices increased for the 23rd straight month, while the percentage of respondents reporting higher prices fell 4 points to 46.2%.
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