Manufacturing Sector Shows Signs of Contraction in August 2025, ISM® Report Indicates
New York, NY – September 2, 2025 – The latest Manufacturing Purchasing Managers’ Index (PMI) from the Institute for Supply Management (ISM) reveals that the U.S. manufacturing sector contracted in August 2025, with the PMI registering at 48.7 percent. This figure represents a decrease of 1.5 percentage points from the July reading of 50.2 percent, signaling a shift from expansion to contraction within the industry.
The ISM Manufacturing PMI is a closely watched economic indicator, providing insights into the health and performance of the manufacturing sector. A PMI reading above 50 percent generally indicates expansion, while a reading below 50 percent suggests contraction. The August report marks the first time the PMI has fallen below the 50 percent threshold since the early months of 2024, prompting careful observation of the sector’s trajectory.
Delving deeper into the report’s components, several key areas contributed to the overall contraction. The New Orders Index experienced a notable decline, falling to 49.6 percent from 53.0 percent in July. This decrease indicates a slowdown in the demand for manufactured goods, which can impact future production levels.
The Production Index also reflected a contraction, standing at 48.6 percent, down from 50.7 percent in the previous month. This suggests that manufacturers are reducing their output in response to softening demand and potentially other economic factors.
Similarly, the Employment Index moved into contractionary territory, registering at 48.1 percent compared to 50.1 percent in July. This indicates that manufacturing companies may be reducing their workforce or slowing down hiring in anticipation of weaker business conditions.
While most sub-indexes pointed towards a contraction, the Supplier Deliveries Index remained above 50 percent, albeit at a slightly slower pace of 51.1 percent. This suggests that supplier lead times are still lengthening, though the rate of this lengthening has eased slightly. This could imply some lingering supply chain pressures, but perhaps not as acutely felt as in previous periods.
The Inventories Index also indicated a contraction, falling to 46.1 percent from 48.5 percent. This suggests that manufacturers are reducing their inventories, which could be a response to lower demand or a strategy to manage costs.
Conversely, the Prices Index rose to 58.7 percent in August from 54.5 percent in July, indicating that manufacturers are paying higher prices for raw materials and components. This could put pressure on profit margins, especially in the context of softening demand.
Customer inventories were deemed “too high” by 42 percent of the respondents, an increase from 39 percent in July. This reinforces the observation of reduced demand and a potential buildup of finished goods within the supply chain.
The ISM report also highlighted that 31 percent of respondents reported their customers’ inventories were “about right,” while only 27 percent reported them as “too low.” This further supports the notion of a market that is not experiencing robust demand.
Looking ahead, the Backlog of Orders Index contracted, decreasing to 44.1 percent from 49.6 percent in July. This indicates that the volume of unfulfilled orders is shrinking, suggesting a potential slowdown in future production commitments.
The New Export Orders Index also showed contraction, standing at 47.8 percent, down from 50.7 percent in the previous month. This suggests that demand for U.S. manufactured goods in international markets has also weakened.
In summary, the August 2025 ISM Manufacturing PMI report paints a picture of a U.S. manufacturing sector that is currently navigating a period of contraction. The decline in new orders, production, and employment, coupled with indications of high customer inventories, suggests that manufacturers are facing challenges related to demand and are adjusting their operations accordingly. While some indicators, such as supplier deliveries, show a slight easing, the overall trend points to a need for continued monitoring of economic conditions and their impact on this vital sector.
Manufacturing PMI® at 48.7%; August 2025 ISM® Manufacturing PMI® Report
AI has delivered the news.
The answer to the following question is obtained from Google Gemini.
PR Newswire Telecommunications published ‘Manufacturing PMI® at 48.7%; August 2025 ISM® Manufacturing PMI® Report’ at 2025-09-02 14:00. Please write a detailed article about this news in a polite tone with relevant information. Please reply in English with the article only.