U.S. manufacturing activity decelerated in August after reaching a four-year high during July, according to the latest Purchasing Managers Index from the Institute for Supply Management, published Sept. 1.

Seen as a reliable barometer for the industrial sector, the PMI registered 54.6% in August — down 1 percentage point from July and trailing expectations of 55.2%.

Four of the five core subindexes that comprise the PMI contracted in August, led by New Orders at -3.0 points (+6.3 points) and Employment at -1.6 after both showed healthy acceleration in July (+6.3, +3.1). (+3.1). Supplier Deliveries — the only subindex that is inverted (anything above 50% indicates slower deliveries) — indicated slowing performance for a ningth straight month with a 0.4-point increase. Within the other five subindexes, Prices held steady after dropping by 1.9 and 9.1 points in July and June, while Backlog of Orders and Imports each saw a decrease of 3.2 points.

ISM shared that 22% of the manufacturing sector’s GDP contracted in August, compared to 20% in July, and 2% of GDP in strong contraction (composite PMI of 45% or lower), vs. 0% in July.

Five of the six largest manufacturing industries expanded in August, in the order of Transportation Equipment; Petroleum & Coal; Computer & Electronic Products; Machinery; and Food, Beverage & Tobacco.

ISM PMI August Survey Respondent Commentary

In the August survey commentary collected by the ISM, 42% of comments were positive and 58% negative — another slight monthly improvement from 38%/62% in July and 34%/66% in June. Pricing volatility was mentioned in 57% of negative comments; the Iran war 30%; increasing lead times 46%; and tariffs 29%. ISM noted that most negative comments mentioned multiple factors.

38% of comments were positive and 62% negative — a slight improvement from 34/66% in June. Among negative comments, pricing volatility was mentioned in 57%, the Rian war 43%, increasing lead times 22% and tariffs 18%.

Here is a sampling of commentary provided by ISM in its August manufacturing PMI report:

• “The economy is annoying; it is getting in the way of otherwise good business. We are making great new products but struggling to compete when prices escalate due to things like tariffs and the conflict in the Strait of Hormuz. I fear that the inflation caused by these factors will lead to lower sales and lower spending power of our customers. Call it inflation! At some point, it leads to an economic downturn or at least an economic pain for many consumers. It’s an uncertain year, our second in a row.” [Chemical Products]
• “For our building products division, profitability is not far off from last year despite economic headwinds, as our specialty products have maintained their market share and sales. Specific to IT, the rising costs in component inputs have caused some budgetary constraints as we plan for the 2027 fiscal year. However, we largely been able to keep costs close to historic consumer price index averages.” [Chemical Products]
• “Supply chain situation, especially in the electronics market, is going through another crisis even bigger and more complicated than during and post COVID-19. That’s mainly due to AI infrastructure and uncertainties in the global market (for oil and other critical supplies) due to war in the Middle East and more complication on trade rules.” [Computer & Electronic Products]
• “Supply markets are increasingly challenging due to inflation and supply availability. Each month has been more difficult than the previous one. Starting to resemble the post-COVID-19 disruptive period.” [Computer & Electronic Products]
• “Prices continue to rise on all goods. Suppliers are noting that energy, steel and labor costs are increasing very quickly. We continue to try to move products around to offset costs. We have moved more products to offshore sources to try to minimize cost impacts.” [Machinery]
• “Photonics, high speed connectors, semiconductors and government orders are expanding significantly. Supply chains domestically and globally are difficult, with increases in lead times and cost.” [Machinery]
• “Commentary this month echoes that of recent months: (1) significant availability/price challenges in commodities heavily consumed by AI, (2) great uncertainty over when the Iran conflict will end, and (3) another round of shifting U.S. tariff policy. Despite these tensions, we continue to focus on what we can control, and the market for our products remains strong.” [Miscellaneous Manufacturing]
• “This month is a blur: Steel prices continue to climb as supply diminishes, aluminum is rising after dropping, and there are many holes on the plate side. Demand seems to be a seesaw. Our prediction ability continues to diminish, with the exception that the year will remain difficult until the end.” [Primary Metals]
• “High steel and aluminum prices (due to Section 232 tariffs) continue to make profitability a challenge. Uncertainty over the U.S.-Mexico-Canada Agreement is at the forefront of many customer conversations. Our industry has also been hit with countervailing and anti-dumping penalties, further raising the cost of equipment.” [Transportation Equipment]
• “Volume is consistent. Our main customer is shifting production from U.S. plants to Mexico plants.” [Transportation Equipment]