US manufacturing activity expands in August for third straight month

WASHINGTON (Xinhua) – Economic activity in the United States (US) manufacturing sector expanded in August for the third straight month, the Institute for Supply Management (ISM) reported on Tuesday.

The Purchasing Managers’ Index (PMI) stood at 56 per cent, up 1.8 percentage points from the July reading. Any reading above 50 per cent indicates the manufacturing sector is generally expanding.

“That marked the highest level for the index since late 2018,” Sarah House and Tim Quinlan, senior economists at Wells Fargo Securities, wrote in an analysis, noting that the production index registered 63.3 per cent, and new orders index climbed to a 17-year high of 67.6.

The economists, however, noted that while the recovery may be broadening, the ISM report raises a number of “caution flags” regarding the sustainability of the recovery.

Despite the high reading on new orders, the employment component, at 46.4 per cent, is consistent with manufacturers continuing to lay off workers, House and Quinlan noted.

“The need to further pare back employment, even if at a slower rate as seen in August, highlights that overall demand remains weak and manufacturers are not fully convinced that the recovery is durable,” they said.

Chair of the ISM’s manufacturing business survey committee Timothy Fiore said the “survey committee members reported that their companies and suppliers operated in reconfigured factories, with limited labour application due to safety restrictions”.

“Panel sentiment was generally optimistic (1.4 positive comments for every cautious comment), though to a lesser degree compared to July,” Fiore said.