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August PMI shows manufacturing still contracting. Production plummets to lowest level since May 2020 as demand weakens and inventories rise. But there may be relief moving into the holiday season.
The manufacturing sector remained stagnant in August, with production levels hitting lows not seen since the early COVID-19 pandemic. The Institute for Supply Management (ISM) August PMI barely moved, inching up to 47.2% from July’s 46.8%. A PMI below 50.0% signals economic contraction, and that’s exactly what the numbers suggest—especially when you dig into the details.
The production index fell to 44.8%, its weakest since May 2020, highlighting a significant slowdown. Meanwhile, the new orders index dropped to 44.6%, indicating a mismatch between supply and demand, leading to climbing inventories.
Timothy Fiore, chair of the ISM’s Manufacturing Business Survey Committee, noted that the industry has largely run out of backlog to rely on. With diminished backlogs after 24 months of declines, the lack of new demand is becoming increasingly problematic. This downturn has also led to a contraction in employment, with the employment index at 46%, as companies continue to "right-size" their workforce through layoffs.
On the other side, S&P Global’s August PMI mirrored these concerns, dropping to 47.9%. This marked the first production decrease in seven months. According to S&P’s chief business economist Chris Williamson, the slowdown is due to softening sales and declining new orders, leading factories to reduce production and companies to hesitate on new projects. The result? Inventories are growing, and the short-term outlook is bleak.
Williamson emphasized that “the combination of falling orders and rising inventory sends the gloomiest forward-indication of production trends seen for one and a half years.”
As we move from peak shipping season into the holiday rush, is there potential for a boom period when things have been so muted and gloomy? Trucker Tools CEO Kary Jablonski highlights expected seasonal changes, though, with manufacturing slump, it may be hard to believe for some.
With retailers and manufacturers prepping for the holidays, there could be a surge in import volumes at major ports, including:
September typically sees a spike in manufacturing as companies rebuild inventories. This could provide opportunities for freight brokers within these areas:
Be on the lookout for potential increase in activity in these areas:
September is peak hurricane season, which could disrupt freight flows, especially in coastal areas. Having a contingency plan is critical to navigate potential delays.
While produce season is winding down, some items are still in transit:
Fruits: Apples, grapes, pears, cranberries, pomegranates, raspberries.
Vegetables: Potatoes, sweet potatoes, winter squash, broccoli, cauliflower, bell peppers.
As the manufacturing sector continues to face challenges, staying informed on freight trends and being proactive will be crucial for navigating the coming months. There may even be some benefits in store for you if you jump ahead the eventual rush, even if the current data is showing a forecast of a silent time period.
Source: SupplyChainDive | LinkedIn\Kary Jablonski
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