U.S. manufacturing activity expands more than expected in August - ISM

A report from the Institute for Supply Management (ISM) showed on Tuesday the U.S. manufacturing sector’s activity expanded further in August.

The ISM's index of manufacturing activity came in at 56,0 percent last month, up 1.8 percentage points from the July reading of 54.2 percent. The reading pointed to the biggest expansion in factory activity since November 2018.

Economists' had forecast the indicator to increase to 54.5 percent.

A reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

According to the report, the New Orders Index stood at 67.6 percent, an increase of 6.1 percentage points from the July reading, while the Production Index registered 63.3 percent, up 1.2 percentage points compared to the July reading, the Backlog of Orders Index posted 54.6 percent, a gain of 2.8 percentage points compared to the July reading, the Employment Index came in at 46.4 percent, an advance of 2.1 percentage points from the July reading, and the Supplier Deliveries Index was at 58.2 percent, up 2.4 percentage points from the July figure.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that after the coronavirus (COVID-19) brought manufacturing activity to historic lows, the sector continued its recovery in August, the first full month of operations after supply chains restarted and adjustments were made for employees to return to work. He also added that the past relationship between the PMI and the overall economy indicates that the PMI for August (56 percent) corresponds to a 3.9-percent increase in real gross domestic product (GDP) on an annualized basis.