ISM Manufacturing Survey Shows Continued Contraction; S&P Data Point to Expansion

01:29 PM EDT, 09/02/2025 (MT Newswires) -- Two surveys released Tuesday painted a mixed picture of the US manufacturing sector for August, with Institute for Supply Management data showing continued contraction and an S&P Global (SPGI) report pointing to a rebound to expansion.

The ISM purchasing managers' index improved to 48.7 last month from 48 in July, but marked a sixth straight contraction. A reading below 50 indicates the manufacturing sector is generally contracting. The consensus was for a 49 reading in a survey compiled by Bloomberg.

The production index fell to 47.8 from 51.4, while new orders rose to 51.4 from 47.1, marking the first expansion following six consecutive months of contraction. The employment index ticked up to 43.8 from 43.4, while the prices gauge eased.

"Tariffs are still putting upward pressure on input costs and this likely will intensify over the next couple of months," Oxford Economics Chief US Economist Ryan Sweet said in remarks e-mailed to MT Newswires. "The prices paid index won't have any bearing on whether or not the Federal Reserve opts to cut interest rates in September, that burden falls on the August employment and consumer price reports."

Official data are expected to show Friday that the US economy added 74,000 jobs last month, compared with a 73,000 gain reported for July, according to a Bloomberg-compiled consensus. Fed Chair Jerome Powell recently struck a more dovish tone than expected during his Jackson Hole speech, indicating a possible policy pivot to lower rates. At the time, Powell highlighted downside risks to employment and suggested that tariff-driven inflation pressures may prove transitory.

The probability that the US central bank will lower its benchmark lending rate by 25 basis points later this month rose to about 92% Tuesday from 86% Friday, according to the CME FedWatch tool. The odds of another pause fell to 8.3% from 14%.

Separately, S&P Global (SPGI) said Tuesday its manufacturing PMI rose to 53 in August from 49.8 the month prior, marking the "strongest improvement in operating conditions" since May 2022. Production surged amid solid growth in new order books, the data provider said.

"The past three months have seen the strongest expansion of production since the first half of 2022, with the upturn gathering pace in August amid rising sales," S&P Global Market Intelligence Chief Business Economist Chris Williamson said. "The manufacturing sector is therefore on course to provide a boost to the US economy in the third quarter."

Overall confidence regarding future output improved despite uncertainty about the business outlook, especially around tariffs. Firms expect demand to pick up in the year ahead, especially from domestic markets, according to the report.

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