After an impressive rebound in July, the US manufacturing ISM gained further ground in August, rising to its highest level in more than two years. The headline index increased from 55.4 to 55.7, while a drop to 54.0 was expected. The breakdown shows a further improvement in new orders (63.2 from 58.3), new export orders (55.5 from 53.5) and imports (58 from 57.5), while supplier deliveries stayed broadly unchanged (52.3 from 52.1). Backlog of orders (46.5 from 45.0), inventories (47.5 from 47.0) and customer inventories (42.5 from 47.5) remained stuck below the 50 - level, while growth in employment (53.3 from 54.4) and production (62.4 from 65) slowed. Prices p aid picked up significantly in August, from 49.0 to 54.0, probably due to higher energy and other commodity prices.
The strong improvement in new orders suggests that the outlook remains positive and the sector will extend its recovery in the coming months.
The low levels of inventories are eye - catching too and suggest that inventories could be increased in the coming months, further supporting production activity. Last month, we were a bit confused by the strong rebound in the manufacturing ISM. This month ’s figure however confirms the improvement and indicates that it was not an outlier.