ISM Report

A manufacturing record punctuates sector’s hot streak

The Institute of Supply Management, headquartered in Tempe, Arizona, released its latest report on American economic activity, and it contains a manufacturing record that punctuates the sector’s recent hot streak.

According to the latest Manufacturing ISM Report on Business, economic activity in the manufacturing sector expanded in August, and the overall economy grew for the 112th consecutive month. The report is compiled by data and input from the nation’s top supply executives. In addition to economic and industry analysis, ISM works to affect the skills gap in American manufacturing.

The report was issued September 4 by Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee. Broken down categorically, it contains percentage increases in a few crucial areas:

Overall: the August PMI registered 61.3%, up 3.2 percentage points from the July reading of 58.1.

New Orders: The new orders index registered 65.1%, an increase of 4.9.

Production Index: The production index registered 63.3%, up 4.8.

Employment Index: 58.5%, a 2-percentage point increase.

Supplier Deliveries: The supplier deliveries index came in at 64.5%, up 2.4 points.

Inventories Index: 55.4%, up 2.1 percentage points.

Prices: The prices index registered 72.1% in August, a 1.1-percentage point decrease from the July reading of 73.2%, indicating higher raw materials prices for the 30th consecutive month.

“Comments from the panel reflect continued expanding business strength,” says Fiore. “Demand remains strong, with the new orders index at 60 percent or above for the 16th straight month, and the customers’ inventories index remaining low. The backlog of orders index continued to expand, at higher levels compared to the previous month. Consumption improved, with production and employment continuing to expand, at higher levels compared to July, despite shortages in labor and materials. Inputs (expressed as supplier deliveries, inventories and imports) expanded strongly due to continuing supply chain inefficiencies, positive increases in inventory levels and a slight easing of imports. Lead-time extensions, steel and aluminum disruptions, supplier labor issues, and transportation difficulties continue, but at more manageable levels.”

You might notice one negative slipped in toward the end of that list: aluminum and steel. As Fiore mentions, those areas are still experiencing difficulty due to recent tariffs. Market Watch commented that the 14-year high (for rate of growth) is a significant sign. It fends off any doubts that manufacturing’s growth was merely a fleeting trend. Below is a big-picture visual from ISM, showing the sector’s path since 2004.

Manufacturing is growing at its highest rate since 2004.—ISM image

“Export orders expanded at stable levels. Prices pressure continues, but the index softened for the third straight month and remains above 70. Demand is still robust, but the nation’s employment resources and supply chains continue to struggle. Respondents are again overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will impact company revenue and current manufacturing locations. Panelists are actively evaluating how to respond to these business changes, given the uncertainty,” says Fiore.

Of the 18 manufacturing industries, 16 reported growth in August, in the following order: Computer & Electronic Products; Apparel, Leather & Allied Products; Textile Mills; Paper Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Furniture & Related Products; Machinery; Nonmetallic Mineral Products; Transportation Equipment; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; and Printing & Related Support Activities. The two industries reporting contraction in August are: Wood Products; and Primary Metals.

Readings over 50% indicate more companies are expanding instead of shrinking.

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