U.S. manufacturing cooled in August but stayed firmly in expansion, as the Institute for Supply Management’s manufacturing PMI fell to 54.6 from July’s 55.6, missing economists’ 55.2 forecast, while the final S&P Global U.S. Manufacturing PMI held at 53.9 for a third consecutive month, revised up from a 53.2 flash reading and in line with expectations. Output and new-order growth eased as input inflation stayed well above historical levels amid tariff uncertainties and the Middle East war, pushing firms to raise charges and citing muted client appetite, though purchasing rose for an eighth month and optimism supported further hiring. ISM’s new orders slowed to 53.7, factory employment eased to 51.2 and supplier deliveries lengthened further, while the prices-paid index remained elevated at 71.1; ISM linked some of the pullback to a fading boost from front-loaded orders tied to the six-month U.S.-Israeli war with Iran, even as AI-related investment and expected inventory replenishment continued to support the sector, which accounts for about 9.4% of the economy. Separately, the euro zone’s manufacturing sector expanded at its fastest pace in more than four years, with S&P Global’s Eurozone Manufacturing PMI rising to 52.7 from 51.9, led by Germany at 54.3 and a return to growth in France, while Italy and Spain contracted. Canada’s S&P Global Manufacturing PMI eased to 53.0 from 53.5 but stayed in expansion for a fifth month as output rose to 52.8 and employment hit 52.0, its highest since October 2024, though new export orders remained in contraction at 48.2 and the collapse of U.S. trade talks—followed by new 50% tariffs on $20 billion of Canadian imports on August 22—cast doubt on whether the pace can be sustained, even as the future output index climbed to 58.7. Britain slipped to 51.7, and Asian factories in Japan, South Korea, China and Singapore extended gains on solid demand for semiconductors and other AI-related hardware, with Singapore’s Manufacturing PMI edging up to 51.5 from 51.4 for just over a year of consecutive expansion and its Electronics PMI rising to 52.6 from 52.4 on strong external demand for memory chips from major U.S. hyperscalers, even as the Middle East conflict lengthened supplier deliveries and pushed up energy and other input costs. With input-price pressures still high, financial markets were pricing a roughly 70% chance of a 25-basis-point Federal Reserve rate increase at the September 15-16 meeting after Chair Kevin Warsh said the central bank would have work to do if confidence on the 2% inflation target is lacking.