Key Highlights

  • The S&P Global US Manufacturing PMI was unchanged at 53.9 in August, signaling solid expansion in the manufacturing economy for a twelfth consecutive month.
  • Output volumes grew for a fifteenth straight month, though at the weakest pace since February, while new orders grew at a solid pace largely confined to the domestic market as exports fell for a fourteenth consecutive month.
  • Business confidence rose to a three-month high, supporting the fastest rate of Job creation recorded so far in 2026, even as backlogs of work increased for a sixth consecutive month.
  • Input cost Inflation eased to a five-month low but remained well above its historical average, with price increases commonly linked to the war in the Middle East and tariffs.

Solid Expansion Continues Despite Slower Underlying Growth

US manufacturing operating conditions improved solidly again in August, according to the latest PMI data from S&P Global. The headline seasonally adjusted S&P Global US Manufacturing Purchasing Managers' index was unchanged at 53.9 in August, signaling a twelfth consecutive month of solid expansion in the manufacturing economy. Growth in production and order books eased during the month, with firms commonly linking the slowdown to higher prices and tight Supply conditions that they often attributed to the war in the Middle East and Tariff uncertainty.

An economist at S&P Global Market Intelligence said growth in the manufacturing economy remained welcome, but that the August data point to some cracks in the sector's health, with both output and new order growth slowing amid concerns that further price rises and material shortages would weigh on the sector going forward.

Output and Orders Both Slow, While Exports Continue to Decline

Output volumes rose for a fifteenth consecutive month in August, although growth continued to slow and was the weakest pace recorded since February. Firms often cited stock building and new order growth as key supports to production during the month. Stocks of finished goods increased for the fourth time in five months, at the sharpest rate since May, as manufacturers built inventories of inputs and finished goods to guard against further price increases and delivery delays.

New orders rose at a solid pace in August that was little changed from July, though growth was largely confined to the domestic market. Export orders fell for a fourteenth consecutive month, with tariffs reported to have weighed on foreign sales, although some firms noted that pockets of improved Demand from Europe had partly offset that impact.

Backlogs Rise as Firms Respond by Hiring Faster

Backlogs of work rose for a sixth successive month in August, as higher order volumes and material shortages placed further strain on manufacturers' capacity. Firms responded by increasing staffing levels at a faster pace during the middle of the third quarter, with the rate of job creation the strongest recorded so far in 2026. That hiring response was supported by improved optimism about the year-ahead outlook, with confidence rising from July to a three-month high as firms linked their upbeat expectations to hopes that Business expansion and customer retention plans would come to fruition, alongside hopes that the war in the Middle East would end. Overall sentiment strengthened to its highest level in three months.

Input Costs Ease From Their Peak but Remain Historically High

Purchasing activity increased for an eighth consecutive month in line with higher production requirements. Where buying rose, firms often linked the increase to efforts to secure inputs ahead of further price increases and supply disruption. As a result, pre-production inventories continued to expand, though the pace of accumulation was the softest since April amid ongoing difficulties receiving inputs due to material shortages and elevated prices. These issues contributed to another marked lengthening of average supplier lead times in August, with the latest deterioration among the steepest recorded over the past four years.

On the price front, input cost inflation eased further from its recent peak in May to a five-month low. Even so, the rate of increase remained well above its historical average, with goods producers reporting broad-based increases in input prices linked to the war in the Middle East and tariffs. Manufacturing companies, in turn, raised their own selling prices at the slowest pace since February, suggesting firms have so far absorbed some of the higher input costs rather than passing them fully through to customers.

A Cautiously Optimistic Outlook

The S&P Global data present a picture of a manufacturing sector still expanding at a solid pace, but one increasingly shaped by the tension between resilient domestic demand and mounting cost and supply pressures tied to tariffs and the ongoing conflict in the Middle East. With business confidence and hiring both improving even as output and order growth slow, the survey suggests manufacturers are betting on an eventual easing of these pressures, a bet that will be tested in the months ahead depending on how the Iran conflict and trade policy evolve.