ISM: Manufacturing Activity Expanded at a 13-Year High in September

The Institute for Supply Management (ISM) said that manufacturing activity expanded robustly in September, expanding at its fastest pace since May 2004. The ISM Manufacturing Purchasing Managers’ Index (PMI) increased from 58.8 in August to 60.8 in September.

The sample comments tended to echo the strong data, with mostly positive feedback from the respondents on healthy gains in sales and an optimistic business outlook, but they also noted labor shortages and challenges from recent hurricanes.

In September, new orders (up from 60.3 to 64.6) and production (up from 61.0 to 62.2) both grew at rates not seen since February, and more importantly, hiring (up from 59.9 to 60.3) accelerated at its briskest pace since June 2011.

Overall, these data continue to reflect a healthy manufacturing sector, buoyed by solid growth in demand and output and improvements in the global economy. In that way, the results were quite consistent with the latest results for the NAM Manufacturers’ Outlook Survey, which found that nearly 90 percent of respondents were positive about their own company’s business outlook.

In the ISM data, new orders have now exceeded 60—a measure consistent with strong expansions in activity—in 8 of the past 10 months. In addition, exports (up from 55.0 to 57.0) have expanded for 19 straight months, highlighting how international sales have also turned a corner after serving as a drag for much of the past couple years.

Meanwhile, prices for raw materials (up from 62.0 to 71.5) picked up notably in September, with that index rising to its highest level since May 2011. While we have seen decelerating pricing pressures in general since the spring months, this more-recent pickup reflects a rebound in some commodity costs. The increase in the latest month could be related to Hurricane Harvey, according to some of the businesses responding to the survey.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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