Economy

Manufacturing Conditions Tighten, Growth Slows: PMI

Written by David Schollaert

September 8, 2022

The S&P Global US manufacturing PMI – another measure of manufacturing – slipped to 51.5 in August, contracting for a second straight month and its lowest level in two years, as output and new sales fell further last month.

August’s results are down slightly from 52.2 in July, broadly in line with the earlier released ‘flash’ estimate of 51.3. The headline index reading was the lowest since July 2020, with the latest data indicating subdued overall health conditions across the US manufacturing sector.

The report said that output contracted for a second straight month as new orders fell for the third month in a row amid weak client demand, in turn, linked to the impact of inflation and economic uncertainty on customer spending. (Recall that a reading above 50.0 indicates growth).

“Barring the initial pandemic lockdowns months, this is the steepest downturn in US manufacturing seen since the global financial crisis in 2009,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Contributing to weak operating conditions last month was a third successive monthly fall in new orders. Manufacturers registered a modest decline in new sales, often linking this to muted client demand following greater economic uncertainty and hikes in prices.

The rate of decrease was broadly in line with those seen in June and July, and external demand remained weak, as new export orders fell at the second-sharpest pace in 27 months, the report said.

“Worryingly, the sharpest drop in demand was recorded for business equipment and machinery, which points to falling investment spending and heightened risk aversion,” added Williamson. “Similarly, payroll growth slowed close to stalling, reflecting a growing reticence to expand workforce numbers in the face of a deteriorating demand environment.

By David Schollaert, David@SteelMarketUpdate.com

David Schollaert

David Schollaert is a senior analyst for Steel Market Update. David joined SMU after more than a decade in the metals and mining industry in a myriad of different roles. Much of his early experience and expertise were within the coverage and analysis of steel-making raw materials and served previously as senior editor of the CRU Prices Service. Most recently, however, before his return to market analysis, David held roles as a metals buyer and an operations manager for raw material suppliers. Based in CRU’s Pittsburgh office, David can be reached at david@steelmarketupdate.com or 724-720-1008.

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