ISM manufacturing PMI rises at fastest rate since 2018 in V-shaped bounce

  • The US manufacturing industry accelerated its growth through August as factories reopened and supply chains recovered.
  • The Institute for Supply Management’s purchasing managers’ index gained to 56 last month from 54.2, according to a Tuesday report. The expansion is the PMI’s fastest in nearly two years.
  • Economists surveyed by Bloomberg expected a reading of 54.8.
  • The firm’s New Orders Index climbed to 67.6 from 61.5, its highest point in more than 16 years.
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US manufacturing expanded more than anticipated in August as the industry’s recovery from coronavirus shutdowns picked up pace.

The Institute for Supply Management’s purchasing managers’ index jumped to 56 last month from 54.2, according to a Tuesday release. Economists surveyed by Bloomberg expected a reading of 54.8. The increase is the PMI’s fastest pace of improvement since late 2018.

Readings above 50 indicate industry expansion, while those below the threshold signal contraction. The gauge tanked below 30 at the start of the pandemic before sharply swinging higher. The steady climb resembles the V-shaped recovery trend sought after by economists, though other indicators suggest the recovery has been more turbulent.

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August marked the first full month of operations since major supply chains restarted and adjustments were made to safely bring employees back to work, ISM said. Safety precautions limited rehiring efforts, but the firm’s Employment Index still rose 2.1 points to 46.4 points. 

ISM’s new orders gauge climbed to 67.6 from 61.5, posting its highest level in more than 16 years. The firm’s Production Index gained 1.2 points to 63.3. 

Of the 18 manufacturing industries tracked by ISM, 15 reported growth in August. The three segments shrinking through the month were printing and related support activities, petroleum and coal products, and furniture products.

Much of the industry’s rebound has been fueled by an uptick in auto sales and continued strength in the housing market. Still, some experts fear that the manufacturing bounce-back will slow as firms settle into a weakened level of operations. Lasting pandemic-sourced headwinds will keep the recovery “to only a modest pace going forward,” Oren Klachkin, US economist at Oxford Economics, said in a note.

“With the boost from reopenings now mostly in the past, manufacturers have largely matched activity to meet the current weak state of demand, but won’t meaningfully ramp up production until the virus threat is fully contained,” he added.

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