St. Paul, MN (September 4, 2020) –U.S. manufacturing expanded in August at the fastest pace since late 2018, powered by growth in new orders that are a bright spot in an otherwise struggling economy.
A gauge of factory activity increased to 56 during the month from 54.2 in July, Institute for Supply Management data showed Tuesday. Readings above 50 indicate expansion, and the figure surpassed nearly every estimate in a Bloomberg survey of economists and the median projection of 54.8.
The purchasing managers group’s measure of orders, which jumped more than 6 points, reached the highest point since the start of 2004. The increase in bookings, along with declining inventories, should continue to underpin production. The ISM’s gauge of output improved to a more than two-year high, though factory employment remained weak.
Improved factory activity, along with strength in housing and auto sales, suggest the fledgling recovery is beginning to broaden. The gradual reopening of businesses and steady improvement in consumer demand that left inventories depleted are boosting manufacturing, helping support the economic rebound amid elevated unemployment and layoffs across industries.
“The index was stronger than July but we’re still recovering from the historically low levels of the pandemic,” said Timothy Fiore, chairman of the ISM Business Survey Committee, said on a call with reporters. At the same time, Fiore said he expects the recent strength to continue in September, traditionally a good month for factories.
Stocks maintained gains, the yield on the 10-year Treasury note was little changed and the dollar rose.
Fifteen of the 18 manufacturing industries tracked by the ISM, the most since March 2019, reported growth in August, led by wood products, plastics and rubber, food and textiles.
The pickup in U.S. manufacturing output is slightly faster than Europe’s, according to separate data from IHS Markit. At the same time, an acceleration in new orders contrasts with a slight slowdown in that gauge for the euro area, highlighting uneven global growth.
The ISM’s index of factory inventories fell to 44.4 in August, the lowest since January 2014, indicating stockpiles were declining at a faster pace. Customer inventories contracted at the quickest rate since June 2010, the report showed.
“The recovery in production is badly lagging the stronger turnaround in spending, with the result that inventories are now looking very lean,” Andrew Hunter, senior U.S. economist at Capital Economics Ltd., said in a note. “That points to further gains in production in the months ahead.”
The overall manufacturing gauge was also boosted by a slowdown in delivery times, which indicates supply bottlenecks. The ISM’s measure of export orders also rose to the highest level since the start of the year.
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Matsuura Machinery USA, Inc., located in St. Paul, MN is the U.S. subsidiary of Matsuura Machinery Corporation in Japan. Matsuura, an innovator in the design, development and manufacture of high-precision manufacturing solutions for more than 80 years, has been the forerunner in designing pioneering technology and manufacturing solutions to a variety of industries around the globe. Matsuura Machinery USA, Inc. delivers unmatched excellence in 5-axis, vertical, horizontal, linear motor, multi-tasking CNC machine tools and machines with a powder bed metal AM platform with machining capability. Matsuura Machinery USA, Inc. provides the service, applications and technical field support that have always been the Matsuura standard for business.
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