U.S. manufacturing activity continued its expansion in August, according to Institute for Supply Management data released Tuesday, with 15 of the 18 manufacturing industries included in the data reporting growth. Last month marked the highest level of expansion in the ISM’s manufacturing index since Q4 2018.
The ISM’s manufacturing index rose from its 54.2 reading in July to 56 in August. Readings above 50 indicate expansion, and August’s reading was well ahead of forecasts for a reading of 54.5.
New orders and production are growing, but manufacturing employment is still contracting.
This marks the fourth consecutive month of expansion for the industry, ISM reported, and a sharp reversal from the 11-year low of 41.5 measured in April. The headline index was lifted by sharp increases in orders (67.6 vs. 61.5 in July) and production (+1.2 points), both growing for the third consecutive month, with new orders also reaching the highest levels since December 2017. Factory inventories fell to 44.4 in August, the lowest reading since January 2014, which denotes that stocks were declining at a faster pace. Customer inventories contracted at the quickest rate since June 2010, the report showed.
The manufacturing index performed better than forecasts, but the outlook for employment in the sector remains challenged; while the ISM’s employment index rose to a six-month high in August, the data shows factories are continuing to cut staff.
This month’s report underscores a steady recovery for U.S. manufacturers, who were some of the first to cease operations in late March due to coronavirus-induced shutdowns and subsequent supply chain disruptions. As we look forward, we expect manufacturers to continue their focus on technological innovation, focusing on supply chain transparency, increasing their manufacturing efficiency and reducing the risk of operational disruptions.
