Financial news is abuzz today regarding the latest Institute for Supply Management (ISM) Report on Business indicating that the U.S. manufacturing sector actually grew in August for the first time in 19 months. The ISM manufacturing index surpassed the magic 50 mark, rising to a level of 52.9 in August. Eleven of eighteen manufacturing industries reported growth in August, which is an important sign of broad-based growth.
Of more significant importance, new orders rose nearly ten percentage points to 64.9 in August, the highest level since December of 2004. The customer inventories index was the lowest it has been in over three months which reflects that a cycle of replenishment of finished goods is underway. New export orders are up almost 7 points in the last three months further indicating increased cause for optimism.
On a negative note, the ISM prices index registered 65 percent in August, 10 percentage points higher than in July, and a cumulative 21.5 percentage points higher than May. This is a rather concerning trend in that continued higher prices for supply will surely dampen any longer-term momentum in product demand.
As noted in yesterday’s posting, Will Emerging Asia Economies Lead as well as Sustain in Business Recovery?, while the news that U.S. manufacturing and supply chains may have finally turned the corner toward positive trending, the U.S. is still lagging emerging Asia countries in leading the overall global recovery.
Other countries that also reported very positive manufacturing growth activity for August were:
- Australia, up 7.2 points
- Hong Kong up 2.9 percentage points
- France up 2.7 percentage points
- China up 2.3 percentage points
- Sweden up 1.9 percentage points
Finally, global supply chains may be turning the corner toward more positive growth. While there is new evidence that the U.S. may be on the upswing, the real test is whether momentum can be sustained through the coming months, since there is still a long way to go.