Economist expectations were blown away in August with U.S. manufacturing levels accelerating at close to a two-year high. The encouraging data was released by the Institute for Supply Management (ISM) and coincided with the stocks reaching a record high, having regained all losses incurred during the Covid pandemic.
The ISM’s Purchasing Managers Index (PMI), which gauges national factory activity, reached a level of 56.0 last month, marking the fourth straight month of economic growth for the manufacturing sector.
A PMI reading above 50 points indicates an expansion in the manufacturing sector, which makes up 11 percent of the U.S. economy. A poll of economists had forecast a more modest increase.
The index is now at its highest level since November 2018, up from 54.2 in July.
In August, U.S. factories continued climbing out of the #coronavirus quagmire, the @ISM® Report On Business® finds. Gains in new orders helped push #Manufacturing PMI® to 56%, the sector’s highest level of expansion since November 2018. https://t.co/AVX1th9Is1 #ISMPMI #economy
— Institute for Supply Management (@ism) September 1, 2020
According to ISM Chair Timothy Fiore, the August data also “indicates expansion in the overall economy for the fourth month in a row after a contraction in April, which ended a period of 131 consecutive months of growth.” A PMI reading above 42.8 generally indicates economic expansion.
Fiore also said that the ISM’s New Orders Index had reached 67.6 percent—a significant 6.1 percentage point increase from July.
“Among the six biggest manufacturing industries, food, beverage, and tobacco products remains the best-performing sector, with chemical products, computer and electronic products, and fabricated metal products growing strongly,” Fiore said. “Transportation equipment also expanded, but at a low rate. Petroleum and coal products sank into contraction territory.”
The federal government’s employment report is due out on Friday, and the Reuters survey of economists is expected to show that around 1.4 million jobs were created in August after the addition of 1.76 million in July.