ISM Manufacturing Index: The Institute for Supply Management’s manufacturing index moved up 0.9% (m/m) to 47.2 for August 2024; this value is weaker than the forecast of 50. The new orders sub-index scored at 44.6. The result extended the weak momentum for manufacturing in the US economy, underscoring the impact of elevated interest rates by the Federal Reserve in the sector.

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 43.6 this month, while the inventories sub-index was 50.3.

The five manufacturing industries reporting growth in August are: Primary Metals; Petroleum & Coal Products; Furniture & Related Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The 12 industries reporting contraction in August — in the following order — are: Textile Mills; Printing & Related Support Activities; Nonmetallic Mineral Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Wood Products; Machinery; Paper Products; Chemical Products; and Miscellaneous Manufacturing.

“Our order levels are on a slow, steady decline; it looks like the trend will continue through the end of the year. We are downsizing through attrition and not hiring backfills, but there have been no layoffs to date. The bright spot is a few customer programs have helped increase orders for parts, resulting in some production areas to be very busy while others have little work. Redeploying people where we can.” [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.