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Friday, May 14, 2021

Manufacturing Contracts in August

Economic activity in the manufacturing sector contracted in August following five consecutive months of expansion, while the overall economy grew for the 87th consecutive month, say the nation’s supply executives in the latest Manufacturing “ISM Report On Business.”

The report was issued by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply

Management Manufacturing Business Survey Committee:

“The August PMI registered 49.4 percent, a decrease of 3.2 percentage points from the July reading of 52.6 percent. The New Orders Index registered 49.1 percent, a decrease of 7.8 percentage points from the July reading of 56.9 percent. The Production Index registered 49.6 percent, 5.8 percentage points lower than the July reading of 55.4 percent. The Employment Index registered 48.3 percent, a decrease of 1.1 percentage points from the July reading of 49.4 percent. Inventories of raw materials registered 49 percent, a decrease of 0.5 percentage point from the July reading of 49.5 percent. The Prices Index registered 53 percent, a decrease of 2 percentage points from the July reading of 55 percent, indicating higher raw materials prices for the sixth consecutive month. Manufacturing contracted in August for the first time since February of this year, as only six of our 18 industries reported an increase in new orders in August (down from 12 in July), and only eight of our 18 industries reported an increase in production in August (down from nine in July).”

Of the 18 manufacturing industries, six are reporting growth in August in the following order: printing and related support activities; nonmetallic mineral products; computer and electronic products; miscellaneous manufacturing; food, beverage and tobacco products; and chemical products. The 11 industries reporting contraction in August, listed in order, are: electrical equipment, appliances and components; apparel, leather and allied products; plastics and rubber products; furniture and related products; transportation equipment; machinery; textile mills; paper products; petroleum and coal products; primary metals; and fabricated metal products.

What respondents are saying

“We have been getting lots of inquiries, but not a lot of sales order placements.” (chemical products)

“Business was flat this month overall.” (computer and electronic products)

“Continued strong market demand for our products related to construction.” (nonmetallic mineral products)

“Commercial construction continues to be strong, and therefore our business is very good.” (fabricated metal products)

“New product distribution is increasing.” (food, beverage and tobacco products)

“This past month, sales increased over the trend from the first half of the year. There seems to be a general, albeit slight, loosening of capital purse strings.” (machinery)

“Medical device is still strong.” (miscellaneous manufacturing)

“Business conditions are generally flat.” (transportation equipment)

“Hard to find production associates. Unemployment in the area is around 4 percent. Can’t get enough employees, leads to lots of overtime.” (plastics and rubber products)

“Oil prices continue to seek a ‘footing;’ rig count slowly increasing.” (petroleum and coal products)

The Manufacturing ISM “Report on Business” data is seasonally adjusted for new orders, production, employment and supplier deliveries indexes.