ISM table and synopsis by permission

Please consider the Manufacturing ISM^® Report On Business^® for August 2022.

Manufacturing PMI^® Details

• 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 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.

Treading Water

The details are an interesting mixed bag with new orders up and new export orders down. 

Production is barely above contraction and prices are plunging.

This is a weak, but not significantly weakening report. 

Interesting Comments

• “Demand from customers is still strong, but much of that is because there is still fear of not getting product due to constraints. They are stocking up. There will be a reckoning in the market when the music stops, and everyone’s inventories are bloated.” [Computer & Electronic Products]
• “Sales in target business softening month-over-month, down 12 percent by revenue. Inventory days are increasing.” [Chemical Products]
• “Strong sales continue. The impact of the chip shortage is slowing, and the decreasing COVID-19 resurgence in Asia is now affecting production more than chips.” [Transportation Equipment]
• “Supply in most groups is slowly increasing, but demand appears to be outpacing — causing pricing to either stabilize or increase.” [Petroleum & Coal Products]
• “Inventories are far too high, and we are on pins and needles to see how quickly and at what magnitude our busy season begins. We will start seeing that in the next few weeks.” [Food, Beverage & Tobacco Products]
• “Continue to struggle with electronic component shortages. Several smaller machine shops are (manufacturing) the pacing item for our production due to lack of direct labor machinists.” [Machinery]
• “Overall, I have seen much improvement in the availability of raw materials. However, trucking issues continued, and production capacity within some industries remains tight. I have growing concerns that as cement and mineral companies run ‘all out’ to meet demand, we will see more downtime due to maintenance (issues).” [Nonmetallic Mineral Products]
• “Demand is softening; however, we are continuing to produce to replenish inventory.” [Primary Metals]
• “Orders are still strong through the end of the year, but there is a feeling that customers may start pulling back on orders, either canceling them or pushing them into 2023.” [Plastics & Rubber Products]
• “Business conditions are good, and demand is strong. Securing enough raw material supply to keep up is still a challenge.” [Miscellaneous Manufacturing]

Diffusion Index

ISM is a diffusion index. Direction matters, the amount doesn't. 

For example, one company hiring a single worker will offset another company laying off 1,000 workers.

With things near the stall point expect to see things like new orders, and new export orders and employment fluctuate between expansion and contraction until things finally head lower.

A Happy Fed

This is exactly what the Fed wants to see to keep them merrily hiking until they go one too far. 

Meanwhile, the key news of the past week is The Fed is Openly Cheering the Stock Market Plunge Following Jackson Hole

Please tune in if you missed it.

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