U.S. manufacturing activity soars to 13-year high in September

U.S. manufacturing activity expanded far more than expected in September, according to new data released this morning by the Institute for Supply Management. The ISM’s manufacturing index soared to 60.8, topping August’s reading by 2 percentage points. 

The U.S. is now closing in on a full year of expansion, according to ISM data. September’s reading marks the U.S. manufacturing sector’s 13th consecutive month of growth, and the 100th consecutive month of growth for the U.S. economy as a whole.

Multiple reports point to sustained growth

The ISM’s Manufacturing Report on Business is a leading economic indicator based on a survey of the nation's supply executives. September’s 60.8 reading is the highest level the Institute has since May 2004.

Accelerating growth in the U.S. manufacturing sector corresponds with the 3.1% rise in GDP recorded in the second quarter as well as significant manufacturing job increases reported by IndustryNet in recent months. A rebound in construction spending has also helped boost employment in the roofing industry.

Growth was reported in seventeen of eighteen industries reporting to the ISM, with textile mills; machinery, nonmetallic mineral products, transportation equipment, and plastics & rubber leading increases.

The furniture/fixtures industry was the only one to report contraction over the month.

Overall, ISM’s September gauge reflects continued strength in the U.S. manufacturing sector, with big increases reported in new orders, production, and exports. It remains to be seen, however, how severely the fallout from hurricanes Harvey and Irma will affect U.S. industry in the months ahead, with some predicting a one percent loss in GDP due to Harvey.

New orders

The new orders index soared 4.3 points in September to 64.6%, after dipping 0.1% in August. This is the 13th consecutive month U.S. manufacturers have reported growth in new orders.

Fourteen out of eighteen industries reported an uptick in new orders, with apparel, leather & allied products; plastics and rubber products; nonmetallic mineral products; paper products; and chemical products leading the way.

Just three sectors: textile mills; furniture; related products; and printing & related support industries reported a decrease in new orders.

Prices increase

The most significant change in September’s ISM report was the increase in raw materials cost – a trend that has kept up over the past several months. For the 19th consecutive month, prices paid for raw materials were on the rise according to the ISM.

The Prices Paid index rose 9.5 points to 71.5% from 62% in August – a six-year high. 45% of manufacturers reported paying higher prices, while 53% of supply chain executives reported no change in the prices. Just 2% reported paying lower prices, according to the ISM.

Higher prices were recorded all eighteen industries surveyed by the ISM, and included steel and aluminum; food ingredients; electronic components; lumber and wood; and chemicals.

Production, employment, exports inch up

ISM data indicates U.S. industrial production continues on an upward trajectory, up 1.2% to its current level of 62.2%. Industrial production has remained steady, now in its 13th straight month of expansion. Textile mills, apparel, leather & allied products, wood products; and nonmetallic mineral products lead U.S. industrial production in September.

Employment also inched up over last month, and now stands at a 6-year high, registering 60.3 percent in September. This is the 12th consecutive month the sector has posted growth. Textile mills; wood products; and machinery were among the 13 industries to report job growth.

New exports in the U.S. manufacturing sector rose for a 19th consecutive month and now stands at a robust 57%, an increase of 1.5% from August. Chemical products; food, beverage & tobacco products; machinery; and fabricated metal products saw new exports rise the most.

Inventories slip

Raw materials inventories slowed over last month, down 3% though inventories are still in growth territory at 52.5. Customer inventories are still reported as too low, registering 42%. Only two industries, nonmetallic minerals and furniture, reported a surplus in inventories. Ten industries reported having inventories that are too low, while six reported no change.

The Manufacturing ISM® Report On Business® is based on data compiled from purchasing and supply executives nationwide.

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