US manufacturing activity remained firmly in expansion territory in August, although slower growth in output and new orders, combined with persistent supply pressures, pointed to emerging cracks in the sector’s recovery.
The headline seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index (PMI) was unchanged at 53.9 in August, signalling another solid improvement in operating conditions. However, the latest figures suggest that the headline strength masks a more mixed picture. Output growth slowed for the third consecutive month, with production rising for a 15th successive month but at its weakest rate since February. Firms cited stock building and new order growth as key supports for production.
New orders also increased at a solid pace, broadly unchanged from July, but growth was largely driven by the domestic market. Export orders fell for a 14th consecutive month, with manufacturers reporting that tariffs had weighed on foreign sales. Some businesses did, however, point to pockets of stronger demand from Europe as a partial offset.
Supply pressures persist
Supply chain disruption remained a significant constraint on US manufacturers during August. Manufacturers continued to build inventories of both inputs and finished goods as they sought to protect themselves against further price increases and delivery delays. Finished-goods inventories rose for the fourth time in five months, reaching their fastest rate of accumulation since May.
Purchasing activity increased for an eighth consecutive month, while pre-production inventories continued to expand. Yet the pace of input-stock accumulation was the slowest since April as manufacturers struggled to receive materials amid shortages and elevated prices.
Those difficulties contributed to another marked lengthening of supplier lead times, with the deterioration among the steepest recorded over the past four years. S&P Global said manufacturers commonly linked supply and pricing pressures to the war in the Middle East and ongoing tariff uncertainty.
Employment growth hits 2026 high
One of the brighter elements of the August survey was the labor market. Backlogs of work increased for a sixth consecutive month as higher order volumes and material shortages placed additional pressure on production capacity. Manufacturers responded by increasing staffing at a faster rate, with job creation reaching its strongest level so far in 2026.
Business confidence also improved. Manufacturers’ expectations for output over the next 12 months rose to a three-month high, with firms citing anticipated business expansion, customer retention and hopes for an eventual end to the conflict in the Middle East.
Usamah Bhatti, economist at S&P Global Market Intelligence, said the continued expansion was welcome but warned that the August data pointed to “some cracks” in the sector’s health.
Bhatti said stock building had been an important driver of sustained manufacturing output and demand, while both output and new order growth slowed during August amid concerns that higher prices and material shortages would weigh on the sector.
“Manufacturers continued to report difficulties sourcing and receiving raw materials because of supply delays and price rises,” he added, with these pressures commonly linked to the Middle East conflict and the inflationary impact of tariffs.
Input price pressures ease, but remain elevated
There was some improvement on the inflation front, with input cost inflation easing to a five-month low from its recent peak in May. Nevertheless, the rate remained well above its historical average, with manufacturers reporting broad-based increases in input costs associated with tariffs and the war in the Middle East. Factory-gate price inflation also eased, with manufacturers raising their charges at the slowest pace since February.
Overall, the August PMI paints a picture of a US manufacturing sector that remains in robust expansion but is increasingly having to navigate weaker momentum, prolonged export weakness, material shortages, tariffs and elevated input costs. At the same time, improving business confidence and the strongest employment growth of the year provide evidence that manufacturers remain relatively positive about the months ahead.
Never miss a North American manufacturing story
Sign up for our free weekly North American Manufacturing Digital Briefing to receive the latest industry news, insights and analysis direct to your inbox every Monday.
