ISM Manufacturing PMI 54.6 vs 55.2 Est — Every Demand Gauge Fell, Prices Froze at 71.1

Fundamentals · 2026-09-01

Manufacturing PMI 54.6 percent in August, down 1.0 point from July's 55.6 and short of a 55.2 consensus, an eighth straight month of expansion but off the twelve-month high; the Prices Index printed 71.1 for the second month running, unchanged, against a 70.8 estimate — a 23rd consecutive month of rising input costs; New Orders -3.0 to 53.7, Backlog -3.2 to 51.8, Imports -3.2 to 52.5, Employment -1.6 to 51.2, Production -0.2 to 58.3; Supplier Deliveries was the only subindex to rise, +0.4 to 59.3, and it is the one where higher means worse; 24 commodities up in price against two down; ISM maps the headline to 2.4 percent annualized real growth.

What Is This?

• What it is: The Institute for Supply Management's monthly survey of manufacturing purchasing managers, released on the first business day of each month at 10:00am ET and reported by committee chair Susan Spence. The headline PMI is an equal-weighted composite of exactly five subindexes — New Orders, Production, Employment, Supplier Deliveries and Inventories — which means it can be decomposed precisely. A further set of indexes, including Prices, Backlog, Imports and Exports, is published alongside but does not enter the headline.
• Why it matters: It is the first hard read on August activity and the first significant data since Kevin Warsh's Jackson Hole keynote four days earlier, where he said the Fed's predominant focus should be on prices and that the summer's better inflation readings did not show underlying trends meaningfully improving. The Prices Index is the manufacturing-side test of exactly that claim, and it lands three days before the August jobs report.
• How to read it: Fifty is the dividing line, but ISM publishes its own calibration thresholds and they are more useful than the round number. A PMI above 47.5 signals overall economic expansion; New Orders above 51.9 is consistent with rising Census manufacturing orders; Employment above 50.3 with rising BLS manufacturing payrolls. Supplier Deliveries is inverted — above 50 means slower deliveries — so a rising number is supply-chain deterioration, even though it pushes the headline PMI up.

Want the full explainer? Economic News Events, Explained breaks down this release and every other one we cover, in plain English.

Summary

The Manufacturing PMI registered 54.6 percent in August, down 1.0 point from July's 55.6 and below a 55.2 consensus. That is an eighth consecutive month of expansion and a 22nd month of overall economic growth, but it comes directly off the twelve-month high — July's 55.6 was the best reading in the series' last year, against a twelve-month average of 51.8 and a low of 47.9 last December. The direction of travel has turned.

The number that did not move is the story. The Prices Index printed 71.1 percent, identical to July, against a 70.8 consensus. That is a 23rd consecutive month of rising raw-materials prices, and at 71 it means a large majority of purchasing managers paid more than the month before. Set that beside what happened to everything else: New Orders -3.0, Backlog of Orders -3.2, Imports -3.2, Employment -1.6, Production -0.2, the headline itself -1.0. Every demand and activity gauge in the report softened. The cost gauge did not move at all, and it came in hotter than expected.

Because the headline is a simple equal-weighted average of five subindexes, the move can be decomposed exactly. New Orders contributed -0.60 of the 1.0 point decline, Employment -0.32, Inventories -0.12, Production -0.04, and Supplier Deliveries +0.08. New Orders alone accounts for sixty percent of the drop. And the only subindex that added to the headline was Supplier Deliveries — which rose because deliveries got slower. The headline PMI was propped up, fractionally, by the supply chain deteriorating. Strip that mechanical quirk out and the underlying picture is a shade weaker than 54.6 suggests.

Underneath New Orders, the response distribution is worse than the index level implies. The share of respondents reporting higher new orders fell to 19.0 percent from 25.6 in July and 30.9 in May. The net reading — higher minus lower — collapsed from +17.0 in May to +11.4 in July to +3.4 in August. Order momentum has lost roughly two-thirds of its strength since the spring, and the index is now only 1.8 points above ISM's own 51.9 threshold for consistency with rising Census manufacturing orders.

The employment detail deserves attention three days before payrolls. The Employment Index at 51.2 sounds like expansion, but the underlying net is +0.3 — 11.8 percent of respondents reported higher headcount against 11.5 percent lower, with 76.7 percent reporting no change at all. That is as close to dead even as this series gets, and 51.2 sits barely above ISM's 50.3 threshold for consistency with rising BLS manufacturing employment. Of the six largest manufacturing industries, only Transportation Equipment added workers. It fits the low-fire, low-hire pattern the claims data has been showing: almost nobody is being cut, and almost nobody is being added.

The commodity detail explains why prices will not move. Twenty-four commodities were reported up in price against two down — a twelve-to-one ratio. Aluminum has now been up for 33 consecutive months, steel for ten, steel products for nine, hot-rolled steel and electronic components for eight each. On the short-supply list, electronic components have been scarce for 18 straight months, electrical components for 14 and memory for eight, with labor and copper joining them. And no industry at all reported faster supplier deliveries in August — fourteen reported slower, zero reported faster.

Two threads run through the respondent commentary, and they are the same two that ran through this week's other data. The first is energy and tariffs: panelists cite Section 232 steel and aluminum duties, rapidly rising energy and steel costs, USMCA uncertainty, and the Strait of Hormuz conflict. Pricing volatility was named in 57 percent of negative comments, increasing lead times in 46 percent, the Iran war in 30 percent and tariffs in 29 percent. The second is artificial intelligence, and it shows up as a supply constraint rather than a demand story. One Computer & Electronic Products panelist described the electronics supply situation as a crisis "even bigger and more complicated than during and post COVID-19," attributing it to AI infrastructure demand and Middle East uncertainty.

That AI constraint produces the single most telling industry line in the report. Computer & Electronic Products reported higher new orders and lower production in the same month. Orders are arriving and output cannot follow. Set against last week's advance trade data, where capital goods imports rose 46.9 percent year over year while domestic core capital goods orders managed 0.2 percent, and against Warsh's Jackson Hole figure of roughly 9 percent four-quarter growth in equipment and intangibles investment with more than half AI-related, the picture resolves: the AI buildout is real, domestic manufacturers cannot supply it, and the bottleneck is showing up as both imports and prices.

Only two of eighteen industries contracted outright — Wood Products and Chemical Products — and both are diagnostic. Wood is housing, which Warsh named as already showing strains. Chemicals are energy-intensive, and a Chemical Products panelist explicitly linked tariffs and the Hormuz conflict to inflation that could eventually cut into customer spending power. Meanwhile 22 percent of manufacturing GDP was contracting in August against 20 percent in July, and 2 percent sat in strong contraction, defined as a composite PMI of 45 or below, against zero percent in July.

The overall shape is not weakness. Spence's own mapping puts a 54.6 reading at roughly 2.4 percent annualized real GDP growth, and fifteen of eighteen industries grew. It is something more awkward for the Fed: solid growth with an inflation floor that will not give. Four days after the Chairman said the Fed's predominant focus should be on prices, and set a standard requiring confidence that underlying inflation is moving to target clearly and at sufficient speed, the first hard data point since arrived with the price gauge frozen, above consensus, in its 23rd straight month of increases.

The Internals

Manufacturing at a glance, August 2026. The first five rows are the subindexes that compose the headline PMI:

Index · Aug 2026 · Jul 2026 · Change · Direction · Rate of change · Months in trend

Manufacturing PMI · 54.6 · 55.6 · -1.0 · Growing · Slower · 8

New Orders · 53.7 · 56.7 · -3.0 · Growing · Slower · 8

Production · 58.3 · 58.5 · -0.2 · Growing · Slower · 10

Employment · 51.2 · 52.8 · -1.6 · Growing · Slower · 2

Supplier Deliveries · 59.3 · 58.9 · +0.4 · Slowing · Faster · 9

Inventories · 50.6 · 51.2 · -0.6 · Growing · Slower · 3

Customers' Inventories · 42.8 · 40.7 · +2.1 · Too low · Slower · 23

Prices · 71.1 · 71.1 · 0.0 · Increasing · Same · 23

Backlog of Orders · 51.8 · 55.0 · -3.2 · Growing · Slower · 8

New Export Orders · 53.2 · 53.0 · +0.2 · Growing · Faster · 2

Imports · 52.5 · 55.7 · -3.2 · Growing · Slower · 7

The headline is the equal-weighted mean of the five composing subindexes, so the monthly move decomposes exactly. Each subindex contributes its own change divided by five:

Subindex · Change · Contribution to the headline · Share of the 1.0 point decline

New Orders · -3.0 · -0.60 · 60 percent

Employment · -1.6 · -0.32 · 32 percent

Inventories · -0.6 · -0.12 · 12 percent

Production · -0.2 · -0.04 · 4 percent

Supplier Deliveries · +0.4 · +0.08 · The only positive contributor

Total · n/a · -1.00 · Matches the published 54.6 from 55.6

Response distributions, which show more than the index levels do. New Orders first:

New Orders · Percent higher · Percent same · Percent lower · Net · Index

Aug 2026 · 19.0 · 65.4 · 15.6 · +3.4 · 53.7

Jul 2026 · 25.6 · 60.2 · 14.2 · +11.4 · 56.7

Jun 2026 · 22.3 · 64.3 · 13.4 · +8.9 · 56.0

May 2026 · 30.9 · 55.2 · 13.9 · +17.0 · 56.8

Employment, where the net is effectively zero:

Employment · Percent higher · Percent same · Percent lower · Net · Index

Aug 2026 · 11.8 · 76.7 · 11.5 · +0.3 · 51.2

Jul 2026 · 16.3 · 70.4 · 13.3 · +3.0 · 52.8

Jun 2026 · 16.2 · 70.0 · 13.8 · +2.4 · 49.7

May 2026 · 17.0 · 67.6 · 15.4 · +1.6 · 48.6

Production and Supplier Deliveries:

Series · Percent higher or slower · Percent same · Percent lower or faster · Net · Index

Production, Aug 2026 · 25.1 · 62.9 · 12.0 · +13.1 · 58.3

Production, Jul 2026 · 25.1 · 64.5 · 10.4 · +14.7 · 58.5

Supplier Deliveries, Aug 2026 · 21.9 · 74.7 · 3.4 · +18.5 · 59.3

Supplier Deliveries, Jul 2026 · 21.3 · 75.2 · 3.5 · +17.8 · 58.9

ISM's own calibration thresholds, and how much headroom each index has above them:

Index · Reading · ISM threshold · Headroom · What the threshold signals

Manufacturing PMI · 54.6 · 47.5 · 7.1 · Overall economic expansion

New Orders · 53.7 · 51.9 · 1.8 · Rising Census manufacturing orders

Production · 58.3 · 52.0 · 6.3 · Rising Federal Reserve industrial production

Employment · 51.2 · 50.3 · 0.9 · Rising BLS manufacturing employment

Inventories · 50.6 · 44.5 · 6.1 · Expanding BEA manufacturing inventories

The twelve-month path, which puts August in context against a July that was the cycle high:

Month · PMI · Month · PMI

Aug 2026 · 54.6 · Feb 2026 · 52.4

Jul 2026 · 55.6 · Jan 2026 · 52.6

Jun 2026 · 53.3 · Dec 2025 · 47.9

May 2026 · 54.0 · Nov 2025 · 48.0

Apr 2026 · 52.7 · Oct 2025 · 48.8

Mar 2026 · 52.7 · Sep 2025 · 48.9

Twelve-month average 51.8, high 55.6 in July, low 47.9 last December.

Industry And Commodity Detail

Breadth across the eighteen industries surveyed:

Measure · August result

Industries reporting overall growth · 15

Industries contracting · 2, Wood Products and Chemical Products

Largest six industries expanding · 5 of 6

Industries with growing new orders · 11, against 3 declining

Industries with growing production · 12, against 2 declining

Industries adding employment · 7, against 3 reducing and 8 unchanged

Industries with slower supplier deliveries · 14, against zero reporting faster

Share of manufacturing GDP contracting · 22 percent, up from 20 percent in July

Share in strong contraction, PMI at or below 45 · 2 percent, up from zero in July

The commodity lists are where the Prices Index comes from. Twenty-four items were reported up in price against two down, and the persistence counts in brackets show how long each has been running:

Category · Items

Up in price, metals · Aluminum (33 months), Copper (14), Copper products, Steel (10), Steel products (9), Hot-rolled steel (8), Stainless steel (7), Cold-rolled steel (2), Metal products (5), Wire

Up in price, electronics · Electronic components (8), Memory components (6), Electrical components (3), Semiconductors (3), Printed circuit boards (2)

Up in price, energy and freight · Diesel fuel, Fuel (6), Oil-based products (5), Freight (6)

Up in price, materials · Chemicals, Resins (7), Resin-based products (2), Plastic-based products (5), Corrugated products (5)

Down in price · Aluminum (3) and Solvents only

In short supply · Electronic components (18 months), Electrical components (14), Memory (8), Copper (2), Printed circuit boards (2), Steel (2), Tungsten products (2), Labor

Aluminum appearing on both lists reflects a commodity that has risen for 33 months and has been falling for the last three.

Sentiment beneath the indexes was negative on balance, and ISM quantified what respondents were complaining about:

Measure · August

Share of comments positive · 42 percent

Share of comments negative · 58 percent

Ratio of positive to negative · 1 to 1.4

Negative comments mentioning pricing volatility · 57 percent

Negative comments mentioning increasing lead times · 46 percent

Negative comments mentioning the Iran war · 30 percent

Negative comments mentioning tariffs · 29 percent

Positive-to-negative ratio on output · 2.2 to 1, down from 3.3 to 1 in July

Positive-to-negative ratio on new orders · 2 to 1, down from 3.5 to 1 in July

Hiring versus headcount-reduction comments · 1.3 to 1, down from 1.5 to 1 in July

Note that every one of those comment ratios deteriorated month over month, on output, on orders and on hiring alike.

The most diagnostic single line in the industry tables is Computer & Electronic Products, which appears on the list of industries with increased new orders and simultaneously on the list with decreased production. Orders are arriving faster than output can follow, which is what a supply constraint looks like from the inside. It sits alongside electronic components having been in short supply for 18 consecutive months and rising in price for eight.

One genuine tension worth flagging rather than resolving. The Customers' Inventories Index remained in "too low" territory at 42.8 for a 23rd month, which ISM treats as a positive signal for future production. That sits awkwardly beside last week's Census data, where wholesale inventories built 1.3 percent against a 0.2 percent consensus and wholesale stocks are up 5.7 percent year over year. These are different samples measuring different points in the chain — ISM asks manufacturers about their customers, Census surveys wholesalers directly — so both can be true. But if the stock building is happening at distribution while manufacturers' customers report running lean, the September and October readings will show which layer is mistaken.

Impact on USD

• Mixed, lean bullish — the headline missed but the price gauge came in hotter than expected, and the Fed has said explicitly that prices are what matter now.
• Prices at 71.1 against a 70.8 estimate, unchanged for a second month and rising for a 23rd, is the manufacturing-side evidence that underlying inflation is not moving to target at sufficient speed.
• Warsh set that exact standard four days earlier at Jackson Hole; this is the first hard data since, and it fails the test rather than passing it.
• Against it: a 0.6 point miss on the headline with New Orders down 3.0 and Backlog down 3.2 is genuine demand deceleration, which cuts the other way.
• The two-year yield already sits roughly 67 basis points above the funds-target midpoint after Jackson Hole, so a good deal of the hawkish repricing is done.

Impact on US Indices (ES / NQ / YM)

• Mixed, lean bearish — input costs frozen at 71.1 while every demand gauge falls is textbook margin compression.
• Backlog of Orders down 3.2 to 51.8 is the forward-looking problem: order books are being consumed faster than they are being replaced.
• Steel and aluminum producers are on the right side of this, with Primary Metals growing and metals dominating the up-in-price list; Transportation Equipment named Section 232 duties as a direct profitability hit.
• Semiconductor and electronics names have demand but not supply — Computer & Electronic Products reported rising orders alongside falling production, with components short for 18 months.
• The offset is real: fifteen of eighteen industries grew, Production held at 58.3, and ISM maps the headline to about 2.4 percent annualized real growth. This is not a contraction signal.

Impact on Gold

• Slight bullish — a 23rd consecutive month of rising input prices, with 24 commodities up against two down, is the inflation-persistence case in survey form.
• Energy and metals dominating the up-in-price list connects the manufacturing cost floor to the same commodity pressure the Fed Chairman flagged as bearing watching.
• Offsetting: if hot prices push the September FOMC hawkish, real yields rise and that dominates the metal near term.
• Conditional: watch whether the August CPI on September 11 confirms the goods-price pressure this survey is describing.

What To Watch

• August employment situation — Friday, September 4. The ISM Employment Index at 51.2 with a net of just +0.3 suggests manufacturing payrolls contributed close to nothing.
• ISM Services PMI — Thursday, September 3. The service sector is roughly five times the size of manufacturing in employment terms, and its own prices index is the bigger inflation signal.
• August CPI — Friday, September 11. Goods prices are where this survey's cost pressure would show up first.
• FOMC decision and dot plot — Tuesday and Wednesday, September 15-16. Three officials dissented for a hike in July, and this print gives them a 23rd month of rising input costs to point at.
• Next ISM Manufacturing PMI — Thursday, October 1. Watch whether New Orders holds above ISM's 51.9 threshold and whether Prices finally breaks below 70.
• The Customers' Inventories versus wholesale-inventories tension. One of those two readings is wrong about where stock is sitting, and the next two months should say which.

TLDR

ISM Manufacturing PMI, August 2026 (released September 1):

• Manufacturing PMI: 54.6 (vs 55.2 est, 55.6 prior) — a miss, an eighth month of expansion, but off the twelve-month high
• Prices Index: 71.1, unchanged from July and above a 70.8 estimate — a 23rd consecutive month of rising input costs
• New Orders -3.0 to 53.7; Backlog -3.2 to 51.8; Imports -3.2 to 52.5; Employment -1.6 to 51.2; Production -0.2 to 58.3
• Supplier Deliveries was the only subindex to rise, +0.4 to 59.3 — and it is inverted, so the headline was propped up by the supply chain getting worse
• Decomposing the 1.0 point drop exactly: New Orders -0.60, Employment -0.32, Inventories -0.12, Production -0.04, Supplier Deliveries +0.08
• New Orders response net collapsed from +17.0 in May to +11.4 in July to +3.4 in August, with only 19.0 percent reporting higher orders
• Employment net was +0.3 — 11.8 percent higher against 11.5 percent lower, with 76.7 percent unchanged, three days before payrolls
• 24 commodities up in price against two down; aluminum up for 33 straight months, electronic components short for 18
• No industry reported faster supplier deliveries; 14 reported slower
• Pricing volatility named in 57 percent of negative comments, lead times 46 percent, the Iran war 30 percent, tariffs 29 percent
• Only Wood Products and Chemical Products contracted; 2 percent of manufacturing GDP is now in strong contraction against zero in July
• ISM maps the headline to roughly 2.4 percent annualized real GDP growth

Every demand gauge in this report fell and the price gauge did not move at all. New Orders alone drove sixty percent of the headline decline, order momentum has lost two-thirds of its strength since May, and the only subindex that rose was the one where a higher number means deliveries got slower. Meanwhile Prices sat at 71.1 for a second straight month, above consensus, in its 23rd month of increases, with 24 commodities up against two down. Four days after Warsh said the Fed's predominant focus should be on prices and demanded confidence that inflation is moving to target at sufficient speed, the first hard data since says it is not. Payrolls September 4, ISM Services September 3, CPI September 11, FOMC September 15-16.

_For informational purposes only. Not investment advice._