DV: U.S. manufacturing index posts strong August results
The daily warnings about a so-called double-dip recession have apparently not reached the Institute for Supply Management (ISM).
The venerable organization on Sept. 1 issued a report for August manufacturing activity that was one of its most bullish since the economic recovery began in mid-2009. The closely watched "Purchasing Managers Index," which reflects the percentage of purchasing managers reporting better business conditions than in the previous month, registered 56.3 percent, up from 55.5 percent in July, and the 16th consecutive month of readings over 50 percent, a level that indicates growth in the manufacturing sector.
According to ISM, the average PMI from January through August of 57.8 corresponds to a 5.3-percent increase in real gross domestic product.
Most of the 10 indexes measuring the pace of activity in August seemed to point to a growing economy. Indexes measuring production and employment posted solid gains. Customer inventories grew by 4.5 percent, but respondents still said their inventory levels were too low.
Manufacturer inventories grew, while supplier deliveries slowed for the 17th consecutive month and an index of prices paid for products rose by 4 percent.
The only month-over-month declines were in new orders, exports, and order backlogs, yet all remain in upward long-term trajectories, ISM said. Norbert J. Ore, chair of ISM's Manufacturing Business Survey Committee, said manufacturing activity "continued at a very positive rate" in August. Ore told DC Velocity last month that the trend toward lengthening supplier deliveries indicated that demand was picking up. "As deliveries get slower, the economy becomes more robust; so a reading of 60 up from 55 would indicate that deliveries are slower and the rate of the slowing in deliveries is more intense," he said.
Ore noted, however, that slowing deliveries could trigger spot shortages of supplies, which, in turn, could lead to commodity price inflation. "If you overlay supplier deliveries on prices, you see that rapidly extending deliveries support higher prices," he said.
The U.S. equity market reacted favorably on Wednesday to the findings in the ISM report. The Dow Jones Industrial Average rose 255 points, while the index of stocks that make up the S&P 500 increased 31 points.
