According to data released by the Institute for Supply Management (ISM) survey, manufacturing activity in the United States has moderated over the past month due to several factors, including uncertainty on the part of manufacturers about the high prices caused by the rise in inflation due to the conflict with Iran and the high tariffs that could damage the number of orders and sales.
The ISM showed in its report that the manufacturing PMI index dropped slightly from 55.6 in July to 54.6 in August; however, the figure has remained above 50, which is a good indicator that, despite the concerns of manufacturers, the manufacturing sector is showing signs of growth, demonstrating that the downturn is not due to lack of production as such, but to the environment in which it is generated following the push of early orders to avoid shortages.
Susan Spence, chairman of ISM’s Business Survey Committee, said price volatility was the predominant factor for the sector’s moderation.
Spence noted that prolonged delivery deadlines, the highest tariffs added to the conflict in the Middle East, were key factors for the fall. “Many manufacturers highlighted high steel and aluminum prices, due to import tariffs, as a cause of concern,” he told Reuters.
John Ryding, Brean Capital’s chief economic adviser, said recent data, along with other indicators, could suggest an increase in the Federal Reserve’s interest rates at its next meeting.
For Ryding, “the continued availability of jobs in relation to the number of unemployed, the extremely low dismissal rate, the growing scarcity and rising prices in the manufacturing sector, and the continued expansion of manufacturing activity, however, make the Federal Reserve take another small step towards a rate hike on September 16,” he said.
