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Manufacturing Expands in August on New Order Surge

Bill Koenig
By Bill Koenig Senior Editor, SME Media

U.S. manufacturing expanded in August as new orders for products surged, the Institute for Supply Management said today.

The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, registered at 56 percent for August, up from 54.2 percent in July. The index represented the fourth straight month of economic expansion for manufacturing. It was also the best PMI performance since November 2018.

New orders bolstered manufacturing. ISM’s New Orders Index registered at 67.6 percent in August. That was a gain from 61.5 percent in July. August was the best new orders performance since January 2004.

ISM said 15 of 18 industries showed economic growth last month, including wood products, chemical products, primary metals, fabricated metal products, machinery, miscellaneous manufacturing and transportation equipment.

Three industries reported economic contraction, including petroleum and coal products.

Normally, August “is not a good manufacturing month,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.

The normal seasonal trend is for manufacturing to pick up in the fall. “September is a good manufacturing month,” Fiore said. “I don’t see why this wouldn’t continue.”

The PMI plunged earlier this year as factories shut down to try to curb the spread of the novel coronavirus (COVID-19). The index reached a low of 41.5 percent in April.

An index reading above 50 percent indicates economic expansion, while below 50 percent shows economic contraction. The PMI has averaged 49.2 percent the past 12 months. The index is based on a survey of 350 manufacturing supply executives. The PMI is considered a leading economic indicator and a barometer of where the economy is headed.

Despite the August PMI, manufacturing has not recovered fully from the impact of COVID-19, Fiore said.

“I don’t believe we’re back to where we were pre-virus,” he added.

Commercial aviation, part of the transportation equipment category, and oil and gas remain affected by the economic impact of COVID-19, Fiore said. “A big piece (of manufacturing) is wounded and will be wounded for two or three years.”

ISM’s Production Index was 63.3 percent last month, an improvement from 62.1 percent in July. The group said 15 of 18 industries reported an increase in output.

The institute’s Employment Index registered at 46.4 percent in August, up from 44.3 percent the month before. Eight industries reported increased employment while seven said jobs were cut.

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