U.S. Factories Expanded While Diesel Hit a Record $6.50

U.S. factories expanded in August for an eighth month, even as one electronics buyer told the Institute for Supply Management the supply chain was a crisis bigger than Covid. The manufacturing PMI printed at 54.6 percent. The Prices index held at 71.1, its 23rd straight month of increases.

The line that traveled treated that stress as a general shutdown. The survey under it shows output still growing, and a fuel shock that does not wait on a ceasefire.

The Famous Covid Line Came From Electronics

Susan Spence, who chairs the ISM manufacturing survey committee, released the August report on Sept. 1. Fifty-eight percent of the comments were negative and 42 percent were positive. Among the negative notes, pricing volatility showed up in 57 percent, longer lead times in 46 percent, the Iran war in 30 percent and tariffs in 29 percent, with most notes naming more than one cause.

The sentence that left the survey and entered the political argument sat in Computer and Electronic Products. It was not a mill closing. It was a buyer staring at AI hardware demand, oil-linked inputs and shifting trade rules at the same time.

Supply chain situation, especially in the electronics market, is going through another crisis even bigger and more complicated than during and post COVID-19. That’s mainly due to AI infrastructure and uncertainties in the global market (for oil and other critical supplies) due to war in the Middle East and more complication on trade rules.

ISM Manufacturing Business Survey respondent, Computer and Electronic Products, August 2026 report

Electronic components have now been on the short-supply list for 18 months. Electrical components have been there for 14. Memory is on month 8. A machinery respondent said photonics, high-speed connectors, semiconductors and government orders were expanding while lead times and costs rose at home and abroad. The Covid comparison is real for that corner of the floor. It is also a demand story, not a 2020-style stop.

An Eighth Month of Factory Growth

Spence said the August manufacturing PMI of 54.6 percent maps to about 2.4 percent annualized real GDP growth. That is slower than July’s 55.6, which had been the strongest reading since 2022, and it is still expansion. Production stayed at 58.3. New orders cooled to 53.7 from 56.7 and backlogs to 51.8 from 55.0, which she called a warning on the outlook, not a stall.

THE AUGUST ISM READING

Fifteen industries reported growth, including computer and electronic products, machinery, transportation equipment and food. Wood products and chemical products contracted. A chemical buyer wrote that “the economy is annoying; it is getting in the way of otherwise good business,” and that Hormuz and tariffs were lifting prices on goods the firm still wanted to sell. Customers’ inventories remained too low at 42.8, which ISM reads as a support for future output. The floor is busy. The inputs are not behaving.

U.S. Diesel Hits a Record $6.50

Jack Buffington, who directs the supply chain program at the University of Denver, put the split in one sentence: this is an energy problem. Diesel is the fuel for the trucks, tractors and yard gear that move what those 15 growing industries make. The American Automobile Association put the national average at $6.505 a gallon on Saturday, Sept. 19, the first time the daily print has sat above $6.50.

The government’s EIA weekly on-highway diesel average was $6.285 a gallon in the week of Sept. 14, up $2.476, or 65 percent, from $3.809 in the week of Feb. 23, just before the Hormuz shock. That weekly series had already passed the June 2022 mark of $5.78 a gallon that stood as the prior record. Some drivers filling last weekend were already paying above the national print, a few near $7, which is how a $6.50 average reaches a freight surcharge before it reaches a supermarket shelf.

THE DIESEL RUN FROM FEBRUARY

1. Feb. 23, 2026: EIA weekly U.S. average sits at $3.809 a gallon.
2. March 9, 2026: The weekly print jumps to $4.859 as Hormuz traffic seizes up.
3. July 6, 2026: After a mid-June memorandum briefly reopened the strait, the weekly average eases to $4.578.
4. Sept. 14, 2026: EIA weekly average reaches $6.285.
5. Sept. 19, 2026: AAA’s daily national average prints $6.505.

Shuting Pomerleau, director of energy and environmental policy at the American Action Forum, counted about $34.8 billion in extra diesel costs for commercial transport from late February through August, using a $1.61 average pump increase over that stretch, before the September spike. On-highway diesel is about 120 million gallons a day, so each extra $1 a gallon is about $120 million a day. The Gulf Coast diesel crack spread, the gap between diesel and crude, moved through $100 a barrel on Sept. 1, five times the pre-conflict gap of about $20. U.S. refineries were already running at 98 percent utilization in the last week of August, against 94.6 percent a year earlier. There is no idle still to turn on.

Hours of Closure, Then a Spreading Queue

Weather did the rest of the work the war did not need to do. Linerlytica counted 4.31 million teu of containership capacity waiting to berth worldwide in late August, more slots than the roughly 4 million teu stuck at the 2022 peak. The fleet is larger now, so that backlog is 12.6 percent of 34.4 million teu, against 15.7 percent of a 25.3 million teu fleet four years ago. More boxes are immobile than in the pandemic jam. A smaller share of a bigger fleet is tied up.

Shanghai did not go dark for two weeks. Typhoon Saudel closed Yangshan for 54 hours and Waigaoqiao for 48. Ningbo lost 78 hours. Kuehne+Nagel then put average waits at 4.72 days in Shanghai and 3.58 days in Ningbo, with some terminals at seven to nine days. About 135 ships were waiting at Shanghai and about 100 at Ningbo as the China export peak began. Delayed ships left in bunches and missed windows in Busan, Tokyo, Hamburg and Rotterdam. Global idle capacity was only 0.5 percent in August. Cape of Good Hope diversions still absorb an estimated 5 to 7 percent of boxship capacity, so the queue had nowhere to go.

Drewry’s World Container Index rose 1 percent to $4,500 per 40-foot box in the week of Sept. 17. The Shanghai to New York rate of $10,394 was up 7 percent on the week, the first time that leg has sat above $10,000 since the late Covid spike. Shanghai to Los Angeles rose 5 percent to $7,712. Shanghai to Rotterdam fell 9 percent to $3,626 as some Asia-Europe loops drifted back toward Suez. Waiting time at Shanghai stretched from 65 hours in week 36 to 78 hours in week 37. The ocean bill is not a 2021 freeze. It is a split market with the transpacific still expensive and the calendar still slipping.

What Ending the Iran War Would Not Fix

President Donald Trump wrote on Labor Day, Sept. 7, that oil prices “will drop precipitously” when the war with Iran is won and that “it will all happen quickly.” Speaker Mike Johnson said on Sept. 16 that resolving the Strait of Hormuz would have a direct effect on gasoline and would help bring down grocery costs. TankerTrackers, reading satellite imagery from Sept. 14, said the strait was again hosting bi-directional daytime VLCC traffic, with more crude, LNG and LPG moving by ship-to-ship transfer in the Gulf of Oman. Crude in the water is not diesel at the rack.

Ryan Petersen, chief executive of Flexport, said he has been in logistics for 25 years and has never seen anything as bad as this. The White House is selling a single switch. The survey comments, the crack spread and the port queues are a stack.

SHOCKS THAT SURVIVE A CEASEFIRE

• Russia’s export ban: Moscow barred diesel shipments in July and has extended the producer ban through Oct. 31, pulling a supplier that had been about 10 percent of seaborne diesel off the water.
• Cape routing: Diversions around Africa still soak up an estimated 5 to 7 percent of containership capacity even as a fraction of Asia-Europe loops try Suez again.
• Typhoon queues: More than 4 million teu was still waiting after late August, and Sea-Intelligence has put a return to last June’s congestion lows at about four and a half to six months.
• AI hardware: Electronic components have been in short supply for 18 months, a constraint that does not care where a tanker transits.
• The Prices index: ISM’s 71.1 reading has now been in increase territory for 23 months, which is how a fuel spike becomes a parts spike and then a quote a customer will not accept.

A mid-June reopening already ran that experiment. Diesel’s weekly average fell from above $5 in early June to $4.578 on July 6, then climbed through the old high as Russian barrels stayed home, Ukrainian strikes kept hitting refineries, and storms stacked ships off China. Ending the war would cut a crude bottleneck. It would not restock middle distillate, clear Ningbo, or put 18-month chip lead times back on a catalog page.

The Shock Absorbers at Dilworth and Ravenox

Jeff Vojta, chief executive of Dilworth Coffee in Raleigh, North Carolina, has been buying beans through a bad Brazilian crop, tariff rounds, the Iran war and a Super El Niño. The firm used to lock sources 12 to 24 months ahead. It now buys three to six months out because cash is tighter and ocean bills are not. Monthly sales volumes used to swing about 5 percent. They now swing as much as 20 percent. Customers have less room for another pass-through, so the distributor eats the diesel and the research time.

Covid was very scary. This is more stressful. We have this period of disruption that we’ve never encountered before.

Jeff Vojta, CEO, Dilworth Coffee

Sean Brownlee built Ravenox, a rope, cord and leash maker, after 25 years in the Marine Corps, on the idea of U.S. production and U.S. jobs. Small firms, he said, absorb cost until the last minute, and that minute has arrived. “The supply chain works, but with much more cost, friction and uncertainty than during Covid.” Predictability is the thing he wants and cannot buy. A chemical-products respondent in the ISM panel said the same in plainer language: great new products, prices that keep jumping, and a fear that customers will simply spend less.

That is the split the headline missed. Computer and electronics plants are running into AI demand and calling it worse than Covid because the parts are not there. Coffee roasters and rope makers are running into diesel, ocean queues and customers who will not take another increase. Both groups fill out the same survey. Only one of them wrote the sentence that traveled.

Core Prices Keep Climbing After Fuel Is Stripped Out

The Bureau of Labor Statistics, in the August CPI released Sept. 11, said all items rose 0.4 percent on the month and 3.4 percent from a year earlier. Energy was up 2.1 percent on the month and 16.3 percent on the year. Gasoline rose 3.9 percent and 27.4 percent. Fuel oil rose 10.1 percent and 52.0 percent. After food and energy are stripped out, core CPI rose 0.3 percent in August and 2.4 percent from a year earlier, after 0.2 percent in July. Services less energy services rose 0.3 percent and stand 3.0 percent above a year ago. Motor vehicle maintenance and repair is up 5.2 percent on the year. Airline fares are up 23.4 percent.

Those service prints are why a Hormuz truce is a weak inflation plan. Diesel at $6.50 is already in the freight bill. Once a shop rate or a fare moves, it does not come back down with the crack spread. Harvest freight will carry this pump print into food over the next stretch of weeks, which is the pass-through drivers have been describing since the daily average crossed $6.50, and it will land in the ticket whether or not a tanker gets through the strait on a quiet afternoon.