August 2014 ISM Reports

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The Institute for Supply Management’s (ISM) monthly opinion survey showed that expansion of economic activity in the U.S. manufacturing sector picked up speed (to the fastest pace since March 2011) in August. The PMI registered 59.0 percent, an increase of 1.9 percentage points from July’s 57.1 percent (50 percent is the breakpoint between contraction and expansion). ISM’s manufacturing survey represents under 10 percent of U.S. employment and about 20 percent of the overall economy. Jumps in the new-orders, production, export and import sub-indices were the main sources of support for the increase.

“Comments from the panel reflect a positive outlook mixed with caution over global geopolitical unrest,” said Bradley Holcomb, chair of ISM’s Manufacturing Business Survey Committee.

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Higher production and employment allowed Wood Products to expand in August. “International markets are slower due to Euro[zone] holidays, political unrest and slowing Chinese markets,” wrote one Wood Products respondent, however, adding, “North American business [is] off slightly.” Paper Products expanded thanks to higher new orders, production, order backlogs and exports.

The pace of growth in the non-manufacturing sector -- which accounts for 80 percent of the economy and 90 percent of employment -- rose to another all-time record. The NMI registered 59.6 percent, 0.9 percentage point higher than June’s 58.7 percent; the push higher was greatest in the Business Activity and Employment sub-indices. “Respondents' comments vary by business and industry,” said Anthony Nieves, chair of ISM’s Non-Manufacturing Business Survey Committee. “The majority of the comments reflect continued optimism in regards to business conditions. Some respondents indicate that there may be some tapering off in the recent strong rate of growth in the non-manufacturing sector.

Last month we reported the manufacturing PMI rose primarily because of seasonal adjustments to the new-orders sub-index that turned an unadjusted six-month low value into a seven-month high value. It was the NMI’s turn for similar treatment this month. Declining unadjusted New Orders and Employment sub-index values were turned into some of the highest values of the past several years. 

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All three service industries we track reported expansion in August, although only Construction had much breadth of support among the sub-indices.

Commodities up in price included: paper, paper products, and lumber. Commodities down in price included: natural gas, gasoline and diesel fuel. Wood pallets were once again in short supply.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.