US Manufacturing PMI in August Weaker Than Expected as New Export Orders Fell Solidly

The S&P Global flash US Manufacturing PMI fell to 51.3 in August of 2022 from 52.2 in July, below consensus forecasts of 52. This was the lowest growth in factory activity since July of 2020, hit by supply constraints and rampant inflation. The economy has been hit by stifled demand conditions and production cutbacks. Output contracted for the second successive month. New export orders fell solidly as inflationary pressures in key export markets weighed on demand. The surging US dollar added to prices pressures for customers.

US manufacturing Workers
ISM Manufacturing June 2022

Higher input prices dampened customer demand, as some firms stated that clients were monitoring inventories and essential spending more closely. The hope is improved supply chain conditions; the question is does the Ukraine Russian war flow on allow for any gains?

A number above 50.0% is indicative of expansion. 

Highlights

  • Flash US PMI Composite Output Index at 45.0 (July: 47.7). 27-month low.
  • Flash US Services Business Activity Index at 44.1(July: 47.3). 27-month low.
  • Flash US Manufacturing Output Index at 49.3 (July: 49.5). 26-month low.
  • Flash US Manufacturing PMI at 51.3 (July: 52.2). 25-month low.
  • Data were collected 05-22
United States Manufacturing PMI

Commenting on the flash PMI data, Siân Jones, Senior Economist at S&P Global Market Intelligence said:

“August flash PMI data signaled further disconcerting signs for the health of the US private sector. Demand conditions were dampened again, sparked by the impact of interest rate hikes and strong inflationary pressures on customer spending, which weighed on activity. Gathering clouds spread across the private sector as services new orders returned to contractionary territory, mirroring the subdued demand conditions seen at their manufacturing counterparts. Excluding the period between March and
May 2020, the fall in total output was the steepest seen since the series began nearly 13 years ago.

“Lower new order inflows and continued efforts to rein in spending led to the slowest uptick in employment for almost a year. Reports of challenges finding suitable candidates started to be countered by those companies noting that voluntary leavers would not be replaced with any immediacy due to uncertainty regarding demand over the coming months.

“One area of reprieve for firms came in the form of a further softening in inflationary pressures. Input prices and output charges rose at the slowest rates for a year and-a-half amid reports that some key component costs had fallen. Although pointing to an ongoing movement away from price peaks, increases in costs and charges remained historically robust. At the same time, delivery times lengthened at the slowest pace since October 2020, albeit still sharply, allowing more firms to work through backlogs

Source: S&P Global

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