Manufacturing Makes First Gain in 18 Months

A key manufacturing index showed activity at the nation's factories showed growth for the first time in 18 months, a strong signal of a budding recovery in the U.S. economy. 

The Institute of Supply Management's PMI jumped four percentage points in August to 52.9 percent, the highest level since June 2007, driven by growth in new orders and production. An index above 50 indicates growth.

Employment and inventories were still contracting in August, and supplier deliveries were slower than in July. But the new orders index grew 9.6 points to 64.9 percent, the highest since December 2004.

"The year-and-a-half decline in manufacturing output has come to an end, as 11 of 18 manufacturing industries are reporting growth when comparing August to July,” said Norbert J. Ore, chair of the ISM manufacturing business survey committee. “While this is certainly a positive occurrence, we have to keep in mind that it is the beginning of a new cycle and that all industries are not yet participating in the growth.”

At the same time, the inventory index grew 0.9 percentage points but inventories were still firmly contracting, with the index coming in at 34.4 percent, well below the level of 42.6 percent that signals growth over time. 

“The growth appears sustainable in the short term, as inventories have been reduced for 40 consecutive months and supply chains will have to re-stock to meet this new demand," Ore said.

Contact Thomas L. Gallagher at tgallagher@joc.com.