ISM Manufacturing Index Soars in August

Written by Sandy Williams

The ISM Manufacturing Index reached a 14 year high as new orders, production and employment made strong gains in August.

The Index issued by the Institute for Supply Management, jumped 3.2 points to a reading of 61.3, far exceeding the consensus for a posting of 57.6. New orders increased 4.9 points to 65.1, production 4.8 points to 63.3 and employment jumped 2.0 points to 58.5.

“Employment continued to expand, supporting production growth during the month. Respondents continued to note labor-market issues as a constraint to their production and their suppliers’ production capability,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

Recent trade actions appear to be taking a toll on imports and exports. The exports index inched down 0.1 point to a 10 month low of 44.2 and imports dipped 0.8 points to 53.9.

“Respondents are again overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will impact company revenue and current manufacturing locations,” said Fiore. “Panelists are actively evaluating how to respond to these business changes, given the uncertainty.”

Manufacturer inventories continued to expand although customer inventories are still considered too low. The backlogs index gained 2.8 points for a reading of 57.5 indicating a faster rate of growth. Suppliers continued to struggle with keeping up with demand, said Fiore. The suppliers deliveries index grew 2.4 points to 64.5 percent in August.

Prices moderated very slightly last month with the index dipping 1.1 points to a still high 72.3.

ISM reports that growth of the overall economy and manufacturing sector continues to accelerate.

Survey respondent comments included:

“The toughest thing we deal with is the unknown. Dealing with tariffs on steel purchases and not knowing if or when they will end makes planning difficult. We are entering the period when we begin our pricing negotiations for next year and will likely treat the tariffs as if they will be here for the entire year. It’s challenging, but not insurmountable.” (Fabricated Metal Products)

“Business is positive, new equipment sales and inquiries are strong, and the parts business is strong. Raw material costs, especially steel, appear to be leveling off. Cost of manufactured components has also leveled off. Most suppliers are willing and able to suppress cost increases. Tariff impacts are still a concern.” (Machinery)

“Generally high levels of demand continue, and [we are] planning for this elevated rate through the rest of the year.” (Transportation Equipment)

 “Steel tariffs and their threats are putting upward pressure on downstream materials.” (Petroleum & Coal Products)

“We have seen a slight uptick in international business. Suppliers do not seem to know how to handle the recently imposed tariffs. Most are waiting to re-evaluate potential price increases until September.” (Computer & Electronic Products)

“Business conditions are strong. Orders are up. Purchase prices are up. Unemployment is down.” (Miscellaneous Manufacturing)

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