ISM Manufacturing Index
ISM Manufacturing Index: The Institute for Supply Management’s manufacturing index moved up 2.6% (m/m) to 47.6 for August 2023; this value is weaker than the forecast of 50. The new orders sub-index scored at 46.8. While production levels stabilized, the inflow of new orders experienced a more rapid decline, and the pace of job shedding showed signs of easing.
The ISM manufacturing index is based on surveys of 300 purchasing managers in 17 industries. The survey is a diffusion index calculated as a percent of responses. A value of 50 is neutral, while less than 50 denotes contracting manufacturing activity and greater than 50 denotes expanding activity.
Figure 1 breaks down the composite index and sub-indexes. The backlogs sub-index was 44.1 this month, while the inventories sub-index was 44.0.
The five manufacturing industries that reported growth in August are: Printing & Related Support Activities; Transportation Equipment; Food, Beverage & Tobacco Products; Petroleum & Coal Products; and Miscellaneous Manufacturing. The 13 industries reporting contraction in August — in the following order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Textile Mills; Electrical Equipment, Appliances & Components; Chemical Products; Computer & Electronic Products; Paper Products; Wood Products; Nonmetallic Mineral Products; and Machinery.
“Fourth quarter orders falling short of projection and indicating a slowdown in customer demand, though the first quarter forecast remains solid. Unclear if this is an inventory correction. Logistics stabilized and costs are matching 2019. Shortages limited to only a few items now, but suppliers are hesitant to add or replace labor needed in light of slowing demand.” [Fabricated Metal Products]
At Gerdau, we closely monitor the ISM manufacturing index since it is an excellent barometer of the present strength, as well as a window on the likely short-run future, of U.S. manufacturing.