U.S. ISM manufacturing index rises above expectations in August

The U.S. ISM manufacturing index rose to 56 in August, surpassing market expectations of 54.5. The index rose 1.8 percentage points from July’s print of 54.2. The surprise rise vis-à-vis July was seen throughout most sub-indices. New orders rose 6.1 percentage points to 67.8, while new export orders rebounded by 2.9 percentage points to 53.3. The backlog of orders sub-index came in at 54.6, a rise of 2.8 percentage points compared to July.

Consumption contributed positively to the headline index. Put together, the production and employment sub-indices saw a 3.3 percentage point rise. The supplier deliveries sub-index rose to 58.2 from 55.8 in July. The sub-index continues to keep the PMI inflated. Dropping this sub-index would lower the composite manufacturing index.

Out of the 18 manufacturing industries, 15 saw growth in July. The three industries reporting contraction include: printing & related support activities; petroleum & coal products; and furniture & related products.

“Despite continued improvement in the manufacturing sector, the recovery so far has been uneven. While consumption continues to improve, many businesses are still holding back on capital investments (and hiring new labor) due to the uncertainty surrounding the future. Also, not all manufacturing industries have benefited from an ease in lockdowns. These industries, which include about 20 percent of total manufacturing, include aerospace equipment, office furniture equipment, and oil and gas. We expect these industries to continue to be impacted by low demand, at least until the end of this year”, stated TD Economics in a research report.