ISM Manufacturing PMI Expectations – 2/9/2025

Our ISM Manufacturing PMI’s Analysis

The August ISM Manufacturing PMI lands into a messy—but improving—backdrop. The Street sits around 48.6 (vs. 48.0 in July), while our call is a touch firmer at 49.0 (48.5–49.5): still contractionary, but edging closer to the 50 break-even. What nudges us above consensus isn’t a single blowout print, but a mosaic: the S&P Global flash at 53.3 (which typically runs hotter than ISM) points to firmer orders and output; core capex orders +1.1% m/m and shipments +0.7% in July hint at steadier equipment demand; and the regional picture, though mixed, is net less bad—with Empire back in expansion, Dallas still growing, and Kansas City essentially steady, offset by Richmond softness and a weak Chicago PMI. Price dynamics keep a lid on the optimism: ISM Prices Paid cooled to 64.8 from 69.7, but remains elevated, and a firmer July PPI alongside tariff pass-through chatter argues against a swift return to expansion.

ISM Manufacturing PMI

• Street: 48.6 (from 48.0 in Jul).
• Our call: 49.0 (48.5–49.5): above consensus, still sub-50.

Why we’re a shade higher than 48.6

• S&P Global flash jumped to 53.3 on stronger orders/output; ISM typically runs lower than S&P, but direction usually rhymes.
• Core capex (non-defence ex-aircraft) +1.1% m/m and shipments +0.7% in July hint at firmer equipment demand feeding sentiment.
• Regionals are mixed but net less bad: Empire State returned to expansion (11.9); Dallas still expanding (production 15.3); Kansas City characterizes conditions as “mostly unchanged.” Offsetting: Richmond composite −7 and Chicago PMI 41.5. Net: sideways-to-slightly-better nationally.
• Prices/tariffs: ISM Prices Paid cooled to 64.8 in Jul (from 69.7), still elevated; July PPI surprised hotter, with tariff pass-through cited—keeps ISM below 50 despite better momentum.

In Conclusion

Taken together, the signal is “less bad” rather than “strong”: momentum has improved enough to justify 49.0, but sub-50 remains the base case as input-cost pressure and patchy regional demand restrain a broader turn. For trading lenses, the New Orders component is the swing factor—an approach toward 49–50 would validate a marginally firmer headline, while a relapse <47 would argue for a miss. Prices Paid is the risk flag; any re-acceleration would revive tariff-pass-through concerns. Net-net, we look for an incrementally better ISM that stops short of expansion, keeping the “soft landing” narrative alive but unconfirmed.

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