ISM Manufacturing Index

ISM Manufacturing Index:  The Institute of Supply Management’s Index moved up 1.8 points on the month (m/m) to 56.0 for August 2020; this value is stronger than the forecast of 50.  The index has been higher than 50 for three consecutive months (expansion = 50+). The new orders sub-index scored a 67.6. Overall, the ISM manufacturing index is strong, while fundamentals remain unfavorable as the global economy weakens.

The ISM manufacturing index is based on surveys of 300 purchasing managers in 20 industries. The survey is a diffusion index calculated as a percent of responses. A value of 50 is neutral, while less than 50 is contracting and greater than 50 is expansionary.

Figure 1 breaks down the detail of the composite index and sub-indexes. The composite index score for August was 56.0. One year ago, the composite index was strong at 49.1.

Of the 18 manufacturing industries, 15 reported growth in August, in the following order: Wood Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Textile Mills; Chemical Products; Computer & Electronic Products; Primary Metals; Fabricated Metal Products; Machinery; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Paper Products; and Transportation Equipment. The three industries reporting contraction in August are: Printing & Related Support Activities; Petroleum & Coal Products; and Furniture & Related Products

An Institute for Supply Management respondent stated, “Current sales to domestic markets are substantially stronger than forecasted. We expected a recession, but it did not turn out that way. Retail and trade customer markets are very strong and driving shortages in raw material suppliers, increasing supplier orders.” (Fabricated Metal Products)

At Gerdau we closely monitor the ISM manufacturing index since it is an excellent barometer of the present strength as well as a window on the likely short-run future of US manufacturing.

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