ISM chart and excerpts below by permission from the Institute for Supply Management® ISM®

Please consider the August 2025 Manufacturing ISM^® Report On Business^® by Susan Spence, Chair of the Institute for Supply Management^®.

“In August, U.S. manufacturing activity contracted at a slightly slower rate, with new orders growth the biggest factor in the 0.7-percentage point gain of the Manufacturing PMI^®. However, since production contracted at a rate nearly equal to the expansion in new orders, the Manufacturing PMI^® increase was nominal.

“Two of the four demand indicators improved, with the New Orders and New Export Orders indexes showing gains, while the Customers’ Inventories and Backlog of Orders indexes contracted at slightly faster rates. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production.

“Regarding output, the Production Index returned to contraction and the Employment Index edged up slightly, as panelists indicated that managing head counts is still the norm at their companies, as opposed to hiring.

“Finally, inputs (defined as supplier deliveries, inventories, prices and imports), on net, declined further into contraction territory. The Inventories Index improved slightly but is still in contraction territory, the Supplier Deliveries Index indicated slower deliveries, and prices continued to increase, but at a slower rate. The Imports Index moved further into contraction.

“Looking at the manufacturing economy, 69 percent of the sector’s gross domestic product (GDP) contracted in August, down from 79 percent in July. Four percent of GDP is strongly contracting (registering a composite PMI^® of 45 percent or lower), down from 31 percent in July. 

Employment vs Order Backlog

Order backlogs have been in contraction for 35 straight months.

Manufacturers facing massive tariff uncertainties and declining order backlogs will not do much hiring.

What Respondents Are Saying

• “A 50-percent tariff on imports from Brazil, combined with the U.S. Department of Agriculture’s elimination of the specialty sugar quota, means certified organic cane sugar — and everything made with it — is about to get significantly more expensive.” (Food, Beverage & Tobacco Products)
• “Orders across most product lines have decreased. Financial expectations for the rest of 2025 have been reduced. Too much uncertainty for us and our customers regarding tariffs and the U.S./global economy.” (Chemical Products)
• “Tariffs continue to be unstable, with suppliers adding surcharges ranging between 2.6 percent to 50 percent.” (Petroleum & Coal Products)
• “Tariffs continue to wreak havoc on planning/scheduling activities. New product development costs continue to increase as unexpected tariff increases are announced — for example, 50-percent duties on imports from India, and increases to all countries up from original 10 percent. Our materials/supplies are now rising in price, so our sell pricing is again being reviewed to ensure we keep a sustainable margin. Plans to bring production back into U.S. are impacted by higher material costs, making it more difficult to justify the return.” (Computer & Electronic Products)
• “The construction industry, especially home building, is still at a lower level. With new construction at a low level, our new sales are impacted. We are mainly now relying on replacement business. Cost of goods sold is higher due to tariff-impacted goods.” (Machinery)
• “Domestic sales remain flat but are down four percent from plan by unit volume [tariff pricing]. Export demand is falling as customers do not accept tariff impacts, which likely will require some production transfers out of the U.S. Supplier deliveries remain consistent with ocean shipping costs dropping significantly. Tariff costs have biggest financial impact but also costs of copper and of steel products.” (Fabricated Metal Products)
• “The trucking industry continues to contract. Our backlog continues to shrink as customers continue to hold off on buying new equipment. This current environment is much worse than the Great Recession of 2008-09. There is absolutely no activity in the transportation equipment industry. This is 100 percent attributable to current tariff policy and the uncertainty it has created. We are also in stagflation: Prices are up due to material tariffs, but volume is way off.” (Transportation Equipment)
• “Very tentative domestic market, with home building and remodeling not very active at all. Inflation, among other factors, is starting to impact consumer buying power, leading to negative signs for our order files. International markets are upended due to the unpredictability of on-again, off-again tariff activity.” (Wood Products)
• “We’ve implemented our second price increase. ‘Made in the USA’ has become even more difficult due to tariffs on many components. Total price increases so far: 24 percent; that will only offset tariffs. No influence on margin percentage, which will actually drop. In two rounds of layoffs, we have let go of about 15 percent of our U.S. workforce. These are high-paying and high-skilled roles: engineers, marketing, design teams, finance, IT and operations. The administration wants manufacturing jobs in the U.S., but we are losing higher-skilled and higher-paying roles. With no stability in trade and economics, capital expenditures spending and hiring are frozen. It’s survival.” (Electrical Equipment, Appliances & Components)
• “There is still uncertainty in the construction market. Large expansions or investment are hampered by the unknown of costing and the economy. The markets we operate in can be strong short term, but there is an underlying feeling that has you questioning for how long.” (Nonmetallic Mineral Products)

Wow, what a set of comments. Nine of 10 comments specifically mentioned tariffs.

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Fed Survey Shows Manufacturers Don’t Know How to Price Anything

The ISM comments fit hand-in-hand with Fed Survey Shows Manufacturers Don’t Know How to Price Anything

Over half of manufacturers have increased prices. Another 26 percent intend to. And 47 percent expect to raise them again.

But hey, don’t believe me. Don’t believe the Richmond Fed, and don’t believe the ISM. Most of all, don’t believe your lying eyes either.

Believe Trump. There is no inflation. There is no other choice for those afflicted with Trump Worship Syndrome (TWS).

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