US manufacturing activity contracts for 6th straight month

Factory activity in the United States shrank in August for a sixth straight month, driven by a pullback in production that shows manufacturing remains bogged down.

The Institute for Supply Management’s manufacturing index came in at 48.7 last month, according to data released Tuesday. While a slight improvement from 48 in July, details of the report were mixed and the gauge remained in contraction territory.

The group’s index of factory output sank 3.6 points, to 47.8, moving back into contraction territory for the first time in three months. The group’s measure of employment inched up, but remained at one of the weakest levels since the year of the pandemic.

At the same time, there were a few hopeful signs about the outlook. Orders expanded for the first time since the start of the year. The ISM gauge of new bookings jumped 4.3 points, the largest increase since the start of last year, to 51.4.

A measure of prices paid for raw materials declined to 63.7, still elevated but the lowest since February. That follows a 4.9 point drop seen last month, suggesting that tariffs-induced price volatilities are subsiding.

The mixed report highlights the number of cross-currents facing the nation’s producers. While still experiencing higher costs as a result of hikes in import duties, manufacturers are still benefiting from solid business investment and resilient household demand.

Consumer spending

Government data on Friday showed consumer spending rose in July at the fastest pace in four months, fueled by outlays for big-ticket goods such as autos.

Ten industries contracted last month, led by makers of paper products, wood, plastics and rubber, and transportation equipment. Seven industries expanded.

The ISM data also showed order backlogs shrank at a faster pace, helping explain the soft employment figure.

Meanwhile, manufacturers are wrestling with supply chain disruptions related to the Trump administration’s uneven rollout of its trade policy. The ISM supplier delivery gauge showed delivery times lengthened last month. Also, the group’s import index indicated a faster pace of contraction.