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US Manufacturing Sustains Growth as Optimism Returns

The Institute for Supply Management's PMI rose to 56% in August, but employment contracted for a thirteenth month running.

Manufacturing and the overall economy continued to grow in August, according to the Institute for Supply Management’s August report on business. Their purchasing manager’s index for manufacturers grew to 56.0% in August, an increase of 1.8 points from July.


The ISM’s production index rose to 63.3%, up 1.2 points from July. New orders and prices both increased by more than 6 points in August, as the new orders index rose 6.1 points to 67.6% and prices increased 6.3 points to 59.5%. The PMI, new orders, production, and prices indexes all grew for a third month running since pandemic-related contraction in April and May.


Trade picked up for the second month in a row in August as the new export orders index grew to 53.3% and the imports index rose to 55.6%. Suggesting resurgent demand, the ISM’s index tracking order backlog rose 2.8 points to 54.6% as it, too, increased for a second straight month while supplier deliveries slowed for a tenth.


“Demand and consumption continued to drive expansion growth, with inputs remaining at parity with supply and demand,” said Timothy Fiore, CEO of ISM.


Contraction in manufacturing employment slowed but did not move into growth territory in August, sustaining a 13-month trend of shrinking workforce numbers. The ISM’s employment index for August is 46.4%, 2.1 points higher than it was in July.


Quoted respondents to the August ISM survey were more optimistic than they were in June and July as the recovery maintained its course. “Business is very good,” wrote a chemical products CEO. “Production cannot keep up with demand.” A plastics & rubber products executive reported “solid month-over-month order improvement in all manufacturing sectors” and said they were looking to hire more factory operators.


Others reported continued difficulty, the result both of renewed demand as well as the lingering virus. A respondent from the food, beverage, and tobacco products industry said that ramping up production has been a struggle. “We have started and stopped lines numerous times at all 18 of our manufacturing plants due to COVID-19 issues,” they wrote. A member of the transportation equipment industry noted that pressure on airline manufacturers has not let up: “Airline industry continues to be under great pressure,” they said.


The pandemic continued to linger over the list of commodities in short supply. Aluminum cans, electronic components, freight, and lumber were all in short supply for August, while gloves for PPE remained in short supply for a sixth month running.


THIS ARTICLE WAS ORIGINALLY PUBLISHED ON INDUSTRY WEEK BY RYAN SECARD ON SEPTEMBER 1, 2020.