New Orders Drop But US Manufacturing Surveys Still Signal ‘Solid’ Growth In August

Despite sustained relative weakness in US ‘hard data’, US manufacturing operating conditions improved solidly again in August, according to the latest PMI data from S&P Global, but it’s not all rainbows and unicorns…

• August S&P Global US Manufacturing PMI beat, flat at 53.9 from July’s print, but up from the flash print of 53.2 and better than the 53.4 expected.

• August ISM US Manufacturing PMI miss, down from 55.6 to 54.6 (below 55.2 expectations).

Still, despite the miss, ISM still printed near four year highs, with growth moderating only slightly.

However, ISM saw New Orders and Employment dropped in August (with Prices only flat month over month)…

“Growth in the US manufacturing economy remained welcome,” said Usamah Bhatti, Economist at S&P Global Market Intelligence, but he warns “the August data point to some cracks in the sector’s health.”

Data covering most of the second quarter and the period to August indicated that stock building was a key driver of sustained growth in manufacturing output and demand.

Moreover, Bhatti notes that “both output and new order growth slowed in August amid concerns that further price rises and material shortages would weigh on the sector.”

Indeed, although purchasing activity and pre-production inventories increased further, “manufacturers continued to report difficulties sourcing and receiving raw materials because of supply delays and price rises.”

These pressures were commonly linked to the war in the Middle East, which has exacerbated existing supply and inflationary pressures from tariffs.

There were, however, areas of encouragement for US goods producers.

Business expectations for output over the year ahead improved from July to a three-month high, partly reflecting hopes for an end to the war and a smoother domestic policy path.

Firms also noted that “greater stability in conditions were likely to support business expansion and customer retention plans.”

In response, businesses raised employment at the strongest rate seen so far this year.

So choose your own adventure again –  both ISM and S&P Global saw orders drop, but ISM saw employment drop and prices flat while S&P Global saw prices drop and employment improve…?!