U.S. August ISM Index: Manufacturing Expands at Fastest Pace in 2 Years

The U.S. economic profile for August is still largely a mystery, but today’s update on the ISM Manufacturing Index offers an early clue for thinking that last month will remain firmly in the growth camp. The composite value for this widely followed benchmark inched higher last month to 55.7, the highest in more than two years. Although the gain surprised many analysts, my econometric modeling left room for thinking that we could see another decent report, as last week’s ISM preview noted. Surprising or not, today’s ISM news implies that the upbeat macro trend in July will roll on in August once all the numbers are published.

While the composite ISM manufacturing index increased to a two-year high last month, the new orders slice of the data surged even more. That’s a sign for expecting that relatively robust manufacturing activity will persist in the months ahead.

But as the chart above also shows, the employment sub-index slipped a bit. Although the employment reading is still well above the neutral 50 mark, today’s ISM report reminds that the outlook is still muted for expecting anything more than a moderate gain in the rate of increase for US payrolls. Then again, if the surge in the new orders sub-index is a guide, perhaps we’ll see positive surprises in jobs creation down the road.

 

This piece is cross-posted from The Capital Spectator with permission.

One Response to "U.S. August ISM Index: Manufacturing Expands at Fastest Pace in 2 Years"

  1. George N. Wells   September 4, 2013 at 1:44 pm

    So far in this recession capacity utilization has stayed below the 80% level and therefore new hiring is all but nonexistent. What will be needed to drive the demand for more workers will be a sustained period of capacity utilization in excess of 80% strong enough to convince the companies that overtime will not be sufficient to meet the sustained demand. We are still some distance from that condition.