U.S. manufacturing activity contracted again in August, marking the sixth consecutive month of decline, according to the latest Manufacturing PMI® report from the Institute for Supply Management® (ISM®).
The Purchasing Managers’ Index registered 48.7%, a slight increase from July’s 48%, but still below the 50 percent threshold that separates growth from contraction.
“U.S. manufacturing activity contracted at a slightly slower rate, with new orders growth the biggest factor in the 0.7-percentage point gain,” said Susan Spence, Chair of the ISM Manufacturing Business Survey Committee. “However, since production contracted at a rate nearly equal to the expansion in new orders, the increase was nominal.”
Key Index Readings
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New Orders: Returned to growth at 51.4%, ending six months of contraction.
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Production: Fell back into contraction at 47.8%, down sharply from July’s 51.4 percent.
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Prices: Continued to rise, though at a slower pace, registering 63.7% compared to July’s 64.8 percent.
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Employment: Remained weak at 43.8%, indicating continued caution in hiring.
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Supplier Deliveries: Slowed, with an index reading of 51.3%, up from July’s 49.3 percent.
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Backlog of Orders: Declined further to 44.7%, signaling weakening demand.
Sector Trends
The report showed that 69% of manufacturing GDP contracted in August, an improvement from 79% in July. Only 4% of GDP was in “strong contraction” territory (PMI at or below 45), down sharply from 31% in July. Among the six largest manufacturing industries, Food, Beverage & Tobacco Products and Petroleum & Coal Products posted growth.
Spence noted that customer inventories remain “too low,” a status typically seen as positive for future production. However, imports fell further into contraction, while new export orders improved modestly.
Outlook
While the August data suggested that the pace of decline is easing, the mixed picture—growth in new orders offset by contraction in output and employment—highlights the challenges facing U.S. manufacturers. Rising input costs, cautious hiring, and shrinking backlogs continue to weigh on the sector.
“The manufacturing economy remains under pressure, but the narrowing contraction and strength in new orders provide some encouragement,” Spence said.
Read the full August 2025 ISM® Manufacturing PMI® Report for more information.
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