Business Activity
The ISM Manufacturing Index rose slightly to 47.2, while the ISM Services PMI held steady at 51.5. Both sectors showed mixed signals with ongoing inflation concerns.
The ISM Manufacturing Index improved to 47.2 in August from 46.8 in July, marking the fifth consecutive month in contractionary territory. This figure highlights ongoing weaknesses in the manufacturing sector, which constitutes approximately 25% of the US economy. Notably, excluding the pandemic period, the ISM production index reached its lowest level since April 2009. Employment saw a modest increase to 46 from 43.4, offering a positive development following the lowest reading in July since the pandemic began. Additionally, prices paid rose to 54 from 52.9, aligning with pre-pandemic levels and indicating that inflation has not yet been fully controlled. Besides, new orders declined to 44.6 from 47.4, which remains a primary concern.
The ISM Services PMI remained steady at 51.5 in August, a marginal increase from July’s 51.4. New orders continued their recovery from the previous month, reaching 53 compared to July’s 52.4, signalling robust customer demand. However, output growth moderated to 53.3 from 54.5, despite a recent reduction in the order backlog, which decreased to 43.7 from 50.6. Employment levels declined slightly to 50.2 from 51.1 yet marked a positive shift with 2 consecutive months of growth, breaking the previous contraction trend. Furthermore, the ISM Prices Index rose to 57.3 from 57, surpassing market expectations for a slowdown, driven by increased costs in construction services, electrical equipment, food, and labour.
Currently, we are observing rising costs of goods sold alongside declining new orders and revenues. In the service sector, price increases are also notable. We anticipate further increases in unemployment across both sectors.