ISM Manufacturing Index (PMI) Strong in August, Easily Beating Forecast

The Institute for Supply Management (ISM) Manufacturing Index (PMI) increased in August by 2.5 percentage points to 58.8, easily beating the consensus forecast. Of the 18 manufacturing industries, 14 reported growth in August and the report, which has been unusually strong this year, confirms government data indicating strength in the U.S. manufacturing sector.

The New Orders Index came in at 60.3%, a slight decline of 0.1 percentage point from the strong July reading of 60.4%. The Production Index was 61%, a 0.4 percentage point gain from the month prior. Overall, both new orders and production remain very strong and above 60 for the third straight month.

The Employment Index shot up to 59.9%, an increase of 4.7 percentage points from the solid 55.2% in July. The jobs report conducted by the Bureau of Labor Statistics (BLS) released on Friday showed strong employment gains in manufacturing in August and July, with upward revisions bringing the total to 62,000 jobs over the course of two months.

In fact, government data, which has been slow to detect the strength shown in regional and national manufacturing surveys, are beginning to contradict themselves. The ISM Manufacturing Index (PMI) and regional surveys by the Federal Reserve all demonstrate the same strength, though national government reports are being to look like outliers lagging far behind.

The Supplier Deliveries Index registered at 57.1%, a 1.7 percentage point increase from the July reading of 55.4%. The Inventories Index was 55.5%, also an increase of 5.5 percentage points from the July reading of 50%.

“Comments from the panel reflect expanding business conditions, with new orders, production, employment, backlog and exports all growing in August, as well as supplier deliveries slowing (improving) and inventories increasing during the period,” Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee said. “The Customers’ Inventories Index experienced a sharp decline in August compared to July.”

The Prices Index registered 62% in August, the same reading as July, indicating higher raw materials’ prices for the 18th consecutive month.