Continued decline in US factory activity despite AI support.

Arab Sea Newspaper - News Updates

Arab Sea - Follow-ups: The American industrial sector continued to contract for the sixth consecutive month during August 2025, amid continued pressure from tariffs on imports, while artificial intelligence investments provided partial support to some sectors. Data from the Institute for Supply Management (ISM) showed that the main index of industrial sector activity rose to 48.7 points in August, compared to 48.0 points in July. The index remains below the 50-point level that separates contraction from expansion, indicating continued challenges facing a sector that contributes about 10.2% of the US economy. Despite this continued decline, spending on intellectual property recorded its fastest growth rate in four years in the second quarter of the year, and investment in equipment remained strong. This growth is mainly attributed to the boom in technology investments, especially in the field of artificial intelligence. The sub-index for new orders recorded a marked improvement, jumping to 51.4 points after six months of continuous contraction. However, the production index fell to 47.8 points from 51.4 points in July, reflecting a slowdown in the pace of production. The report also indicated a continued weakness in the employment index, with companies accelerating job reduction plans due to uncertainty about demand in the medium and near term. The data showed a slowdown in raw material deliveries, with the supplier delivery index rising to 51.3 points. This slowdown contributed to keeping cost pressures high, as the price index remained at high levels of 63.7 points, reinforcing expectations of accelerating inflation in goods during the second half of the year. The report warned that companies may soon begin to pass on the additional costs resulting from tariffs to consumers, especially as inventories purchased before the implementation of these tariffs decline. This continued decline in the US industrial sector comes in light of the tariff policy pursued by the US administration, which mainly targets Chinese imports. Although this policy aims to protect local industries, its negative effects have begun to appear clearly on the performance of the US industrial sector.