Tempe, Ariz. – – September 07, 2026 -- U.S. manufacturing activity expanded for an eighth straight month in August, but the pace cooled as the ISM Manufacturing PMI fell to 54.6%, down 1 percentage point from July's 55.6%, according to the Institute for Supply Management (ISM). The reading marks the sector's recovery from a 10-month contraction and corresponds to an estimated 2.4% annualized increase in real GDP, ISM said. The broader U.S. economy has now expanded for 22 consecutive months.
New orders and backlogs lose momentum as demand sentiment softens
The New Orders Index dropped 3 points to 53.7% from 56.7% in July, while the Backlog of Orders Index fell 3.2 points to 51.8%. The positive-to-negative comment ratio on demand narrowed to 2-to-1 in August from 3.5-to-1 the prior month. New Export Orders bucked the trend, edging up 0.2 point to 53.2%.
Prices index holds at 71.1% for a 23rd straight month of increases
ISM Chair Susan Spence attributed sustained price pressure to steel and aluminum cost increases across the value chain, tariffs on imported goods, and petroleum-product inflation tied to the Middle East conflict. "The Prices Index reading is still being driven by increases in steel and aluminum prices, tariffs applied to many imported goods, and increases in petroleum-based products as a result of the Middle East conflict," Spence said. Steel, copper, aluminum, semiconductors and memory components were among commodities reported up in price, while electronic components, memory and copper were flagged as in short supply.
Supplier deliveries slow for a ninth consecutive month
The Supplier Deliveries Index rose 0.4 point to 59.3%, extending a slowdown streak to nine months and marking the only one of five PMI subindexes to accelerate versus July. Respondent comments cited pricing volatility (57% of negative remarks), lengthening lead times (46%), the Iran conflict (30%) and tariffs (29%) as key disruptors. Overall sentiment tilted negative, with 58% of comments unfavorable versus 42% positive.
Employment growth slows as hiring-to-headcount-cut ratio narrows
The Employment Index registered 51.2%, down 1.6 points from July's 52.8%, with only Transportation Equipment among the six largest industries reporting higher headcounts. The ratio of hiring to workforce-reduction comments fell to 1.3-to-1 from 1.5-to-1 in July.
Five of six largest manufacturing industries expand in August
Transportation Equipment, Petroleum & Coal Products, Computer & Electronic Products, Machinery, and Food, Beverage & Tobacco Products all posted growth. Of 18 tracked industries, 15 reported expansion overall, while Wood Products and Chemical Products contracted. The share of manufacturing GDP in contraction rose to 22% from 20% in July, and the share in "strong contraction" climbed to 2% from zero.
The Imports Index fell 3.2 points to 52.5%, and the Inventories Index eased 0.6 point to 50.6%. Customers' Inventories remained in "too low" territory at 42.8%, up 2.1 points from July, a status ISM considers generally favorable for future production.