October 4, 2018

ISM’s September Reports: Still Going Strong (Mfg. at 59.8 Percent, Non-Mfg. at 61.6 Percent All-Time High)

Filed under: Economy — Tom @ 7:30 am

From the Institute for Supply Management on Monday:

Economic activity in the manufacturing sector expanded in September, and the overall economy grew for the 113th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The September PMI® registered 59.8 percent, a decrease of 1.5 percentage points from the August reading of 61.3 percent.

The New Orders Index registered 61.8 percent, a decrease of 3.3 percentage points from the August reading of 65.1 percent. The Production Index registered 63.9 percent, a 0.6 percentage point increase compared to the August reading of 63.3 percent.

The Employment Index registered 58.8 percent, an increase of 0.3 percentage point from the August reading of 58.5 percent. The Supplier Deliveries Index registered 61.1 percent, a 3.4-percentage point decrease from the August reading of 64.5 percent. The Inventories Index registered 53.3 percent, a decrease of 2.1 percentage points from the August reading of 55.4 percent.

The Prices Index registered 66.9 percent in September, a 5.2-percentage point decrease from the August reading of 72.1 percent, indicating higher raw materials prices for the 31st consecutive month.

Comments from the panel reflect continued expanding business strength.

Backlog of Orders came in at a pretty strong 55.7 percent. The overall 1.5-point drop shouldn’t cause concern, especially because Production and New Orders are still in the 60s.

On Wednesday, the Non-Manufacturing Report came in extraordinarily strong:

Economic activity in the non-manufacturing sector grew in September for the 104th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The NMI® registered 61.6 percent, which is 3.1 percentage points higher than the August reading of 58.5 percent. This represents continued growth in the non-manufacturing sector at a faster rate and is an all-time high for the NMI® since the inception of the composite index in 2008.

The Non-Manufacturing Business Activity Index increased to 65.2 percent, 4.5 percentage points higher than the August reading of 60.7 percent, reflecting growth for the 110th consecutive month, at a faster rate in September. The New Orders Index registered 61.6 percent, 1.2 percentage points higher than the reading of 60.4 percent in August.

The Employment Index increased 5.7 percentage points in September to 62.4 percent from the August reading of 56.7 percent. The Prices Index increased by 1.4 percentage points from the August reading of 62.8 percent to 64.2 percent, indicating that prices increased in September for the 31st consecutive month.

According to the NMI®, 17 non-manufacturing industries reported growth. The non-manufacturing sector has had two consecutive months of strong growth since the ‘cooling off’ in July. Overall, respondents remain positive about business conditions and the current and future economy. Concerns remain about capacity, logistics and the uncertainty with global trade.

No industry reported a decrease in September.

Backlog of Orders was a very strong 58.5 percent. I don’t think the Business Activity Index can or should stay at its current 65.2 percent level. So if there’s anything to worry about, it would be possible overheating leading to inflation, shortages, and bottlenecks.

I believe the weighted and combined indices, at 61.4 percent (weighted 12 percent for Manufacturing and 88 percent Non-Manufacturing) are also at or surely very near an all-time record.

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