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IndustryNet Blog

U.S. manufacturing activity rockets to 14-year high

Posted by IndustryNet on Tuesday, September 4, 2018

100000270engine_workerU.S. manufacturing activity surged to its highest rate in fourteen years in August, fueled by significant growth in new orders, production and employment. This was reported by the Institute for Supply Management (ISM), which today released its Manufacturing Report on Business. 

U.S. manufacturing activity now stands at 61.3%, up 3.2% from July's 58.1 reading, according to the ISM's latest survey of manufacturing executives.

August's reading of 61.3% represents the nation's 30th straight month of growth in the manufacturing sector, and the 112th consecutive month of growth in the economy overall.

Sixteen of eighteen industries surveyed by the ISM reported growth, led by computer & electronic products; apparel, leather & allied products; textile mills; paper products; and miscellaneous manufacturing.

The wood products and primary metals sector were the only to report contraction, according to the ISM.

A surge in industrial output also added to last month’s positive economic reports, with the Federal Reserve reporting a 1.9% increase in manufacturing output over the past year, while durable goods manufacturing rose 3.2% over the same time frame.

Breaking down the numbers, the ISM’s New Orders index rose 4.9% to 65.1, while the Production Index surged 4.8%. to 63.3. Employment edged up 2% to 56.5, and the Supplier Deliveries Index climbed 2.4% to 64.5%. Prices have been on the rise, expanding for a 30th month, but the rate at which prices increased fell slightly, down 1.1% to 72.1.

A number of commodities rose in price according to the survey, including aluminum; electronic components; packaging materials; hot and cold rolled steel; stainless steel; and steel-based products.

Related: How U.S. aluminum buyers are tackling tariffs

Overall the ISM’s index points to continued strength in the U.S. industrial sector, with manufacturing activity at its highest level since 2004. New orders, production and employment continue to show strong numbers -- despite the looming threat of a trade war as the trade showdown between the U.S. and its largest trading partners continues.

What manufacturing executives are sayingAluminum_Plant_001

Concern over continued tariff actions between the U.S. and its major trading partners such as China remained a common theme among manufacturing executives responding to the survey. But also persistent among respondents was an undercurrent of optimism amid the uncertainty.

Timothy Fiore, Chair of the ISM stated “Respondents are again overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will impact company revenue and current manufacturing locations. Panelists are actively evaluating how to respond to these business changes.”

Last month, the United State Trade Representative announced it was increasing the rate of tariffs on $200 billion of Chinese goods from 10% to 25%. China then retaliated with its own 25% tariff on 5,207 U.S. products worth $60 billion.

One executive in the fabricated metals sector stated “The toughest thing we deal with is the unknown. Dealing with tariffs on steel purchases and not knowing if or when they will end makes planning difficult. We are entering the period when we begin out pricing negotiations for next year and will likely treat the tariffs as if they will be here for the entire year. It’s challenging, but not insurmountable.”

“Business conditions are strong,” says another executive in the Miscellaneous Manufacturing category. “Orders are up. Purchase prices are up. Unemployment is down.”

Another in the Transportation Equipment sector stated “Generally high levels of demand continue, and [we are] planning for this elevated rate through the rest of the year.”

Related: One-stop guide to sourcing U.S. steel suppliers


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