US manufacturing sector sees strongest performance since May 2022

(Sharecast News) - Operating conditions in the US manufacturing sector improved in August at the fastest pace since May 2022, according to a survey released on Tuesday.

The S&P Global manufacturing purchasing managers' index rose to 53.0 from 49.8 in July. A reading above 50.0 indicates expansion, while a reading below signals contraction.

The survey found that growth reflected a combination of higher new orders and inventory building.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "Purchasing managers reported that the US manufacturing was running hot over the summer. 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. Hiring also picked up again in August as factories took on more staff to meet an influx of new orders and an accumulation of uncompleted work for waiting customers.

"The manufacturing sector is therefore on course to provide a boost to the US economy in the third quarter. The upturn is in part being fuelled by inventory building, with factories reporting a further jump in warehouse holdings in August due to concerns over future price rises and potential supply constraints. These concerns are being stoked by uncertainty over the impact of tariffs, fears which were underpinned by a further jump in prices paid for inputs by factories, linked overwhelmingly by purchasing managers to these tariffs.

"Cost increases are being passed on to customers via widespread hikes to factory gate prices. The big question is the degree to which these price rises will then feed through to higher consumer price inflation in the coming months."