United States: ISM manufacturing index hits over six-year high in August
September 1, 2017
In August, the ISM manufacturing index leaped to its highest reading since April 2011 as production, employment and inventories all posted strong gains. The index rose to 58.8 from 56.3 in July, well above market expectations of a smaller pick-up to 56.6. As a result, it now sits further above the threshold of 50 that separates expansion from contraction in the U.S. manufacturing economy, which signals a solid pace of growth in the sector.
The August report paints a bright picture for the sector as nearly all the subcomponents of the index, except customers’ inventories, remained in healthy territory. Expansions in production and new orders both continued to grow at very solid clips, which maintained pressure on manufacturers’ operating capacity. This prompted employment growth to accelerate markedly in August, which was consistent with the month’s employment report. Despite the increase in staffing levels, the backlog of orders continued to grow, and it did so at a faster pace in August than in July.
The manufacturing sector is, however, expected to suffer in upcoming months given that Hurricane Harvey has devastated the southeast coast of Texas. The area is home to a large concentration of factories in the chemical and refining industry, which suffered outages and supply disruptions.
Author: David Ampudia, Economist