In August 2024, the U.S. manufacturing sector continued to face a challenging environment, marked by persistent contraction, but with signs of slowing decline. The Manufacturing Purchasing Managers’ Index (PMI®) registered at 47.2 percent, reflecting the fifth consecutive month of contraction in the sector, although at a slower pace than in July. Key economic indicators, such as new orders, production, and employment, remained in negative territory, highlighting ongoing difficulties within the industry. At the same time, inflationary pressures intensified, with rising input costs for raw materials and transportation.
Despite these challenges, the manufacturing landscape was not without positive developments. Several new factory and manufacturing facility announcements in August underscored a continued commitment to growth and innovation across the country. From advanced manufacturing technologies in New York to renewable energy projects in Texas, these new investments point to pockets of resilience and optimism amid broader economic headwinds. As the sector navigates a complex economic environment, these initiatives may provide a foundation for recovery and future expansion.
A Month in Data: August 2024 Manufacturing Performance
August 2024 manufacturing data from the Institute for Supply Management (ISM) and S&P Global points to a sector still in contraction, though the pace may be slowing. Key indicators of production, demand, and employment remain weak.
ISM Manufacturing PMI Report
The ISM Manufacturing PMI registered 47.2 percent in August, up slightly from 46.8 percent in July, indicating contraction for the fifth straight month. Sub-index values below 50 percent show declining new orders (44.6 percent), production (44.8 percent), and employment (46.0 percent).
New orders and production trended down further in August, while employment contracted at a slower pace compared to July. Backlogs (43.6 percent) contracted sharply as capacity remained higher than demand.
S&P Global US Manufacturing PMI
The S&P US Manufacturing PMI posted 47.9 in August, down from 49.6 in July, signaling a faster contraction versus the previous month. Notable trends include declining production for the first time in seven months, the fastest reduction in new orders since June 2023, and renewed job losses amid falling output.
Both reports show consistent contraction in August, with new orders, production, and employment in negative territory. The S&P index shows a slightly faster decline than ISM.
Together the data paints a picture of manufacturing still struggling with weak demand, leading firms to cut back on output and jobs. Lower backlogs point to excess capacity. However, the declines appear to be decelerating.
What the Data Means
The August reports point to a manufacturing sector still struggling to gain solid footing in the face of slowing demand and economic uncertainty. However, the situation may be starting to stabilize.
The PMI indexes declining further into negative territory shows contraction across much of manufacturing, with firms responding to headwinds by pulling back production and employment. Lower backlogs indicate excess capacity as new orders shrink faster than output.
Weaker client demand, inflation concerns, rising interest rates, and uncertainty surrounding the 2024 election have created hesitation among manufacturers and their customers. This is evidenced through falling new orders and production cutbacks. High costs and supply chain stresses also persist.
The August data shows 65 percent of manufacturing GDP in contraction. Industries such as machinery, fabricated metals, electrical equipment, and chemicals saw noticeable declines across new orders, production, and backlogs. However, areas like food production, primary metals, and computer electronics expanded, underscoring variations across sectors.
New Factory and Manufacturing Announcements
Even as the manufacturing sector contracts overall, major capital investments point to areas of ongoing growth and optimism for the future. Several new facilities were announced that underscore key industry opportunities. Graham Corporation’s new facility in Batavia, NY involves a $17.6 million investment in a new 29,000-square-foot production site, creating 24 skilled jobs. This expansion highlights continuing demand for specialized defense equipment.
Tate’s 420,000-square-foot manufacturing plant in Pocahontas, Arkansas represents substantial capacity growth in data center infrastructure, with 148 new jobs expected. The Houston, Texas region landed two large solar module factories—SEG Solar’s $60 million, 250,000 square foot PV production base and TMEIC’s 144,000 square foot facility. These multimillion-dollar projects tap into rising clean energy demand.
Philip Morris International’s $232 million cigarette and vaping production expansion in Owensboro, KY creates 450 direct jobs, showing enduring demand for tobacco offerings. These projects demonstrate ongoing manufacturing investment in technologies like microelectronics, renewable energy, and precision equipment where U.S. capabilities and market growth make production expansion advantageous despite recent economic challenges.
While risks remain in the near term, major new facilities point to manufacturing segments with staying power thanks to competitive strengths. Investing in these growth areas may help offset broader market contraction.
Future Outlook
With manufacturing contracting for five straight months, questions remain over how long the downturn might last and what the trajectory looks like going forward. Both downside risks and areas of optimism exist.
Near-term manufacturing performance will likely remain weak but stabilize as indicators decline at a more modest pace. Production, employment, and inventories seem to be adjusting down to lower demand levels. Lingering economic uncertainty heading into 2025 could keep growth muted in the coming months.
While manufacturing may tread water at lower levels through 2024, strategic industries could regain momentum quicker amid temporary slowdowns and provide future growth drivers. Careful navigation of political and monetary variables will shape the timing and strength of recovery.
