U.S. manufacturing growth holds steady, inflation pressures ease

U.S. manufacturing growth steadied in August at the slowest pace in over two years, while a measure of materials costs declined for a fifth-straight month in a welcome sign inflationary pressures are abating.

The Institute for Supply Management’s gauge of factory activity held at 52.8, matching the lowest level since June 2020, according to data released Thursday. Readings above 50 indicate expansion, and the latest figure compared with a median projection of 51.9 in a Bloomberg survey of economists.

A 3.3-point improvement in the group’s measure of new orders – which showed contraction in the prior two months – helped offset a decline in the production index to the lowest level since May 2020.

“Sentiment remained optimistic regarding demand, with five positive growth comments for every cautious comment,” said Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee. Still, “Panelists continue to express unease about a softening economy.”

A measure of prices paid for materials used in the production process fell 7.5 points to the lowest level since June 2020. The gauge, which plunged 18.5 points in the prior month, reflects pullbacks in prices for oil, metals and commodities on global recession concerns.

Ten manufacturing industries reported growth for the month, led by mineral products, petroleum and transportation equipment.

The ISM results follow regional reports painting a somewhat mixed picture of the sector. A measure of New York state factory activity plunged in August by the second-most in data back to 2001. However, gauges of manufacturing in the Philadelphia and Chicago areas improved or held up.

Supplier delivery times lengthened slightly, the ISM figures showed, yet at the slowest pace since before the pandemic. And a measure of factory inventories fell 4.2 points to a four-month low of 53.1, showing stockpiles were being rebuilt at a slower pace.

The ISM’s employment gauge, meantime, rose to a five-month-high of 54.2, suggesting more manufacturers were adding to payrolls in August.