ISM Key Points

  1. Manufacturing grew in August, as the PMI registered 56 percent, 1.8 percentage points higher than the July reading of 54.2 percent. “The PMI® signaled a continued rebuilding of economic activity in August and reached its highest level of expansion since November 2018, when the index registered 58.8 percent. 
  2. ISM’s New Orders Index registered 67.6 percent in August, an increase of 6.1 percentage points compared to the 61.5 percent reported in July.
  3. The Production Index registered 63.3 percent in August, up 1.2 percentage points from 62.1 percent in July, indicating growth for the third consecutive month. “All of the top six industries expanded strongly, an improvement from July.
  4. ISM’s Employment Index registered 46.4 percent in August, 2.1 percentage points higher than the July reading of 44.3 percent. This is the 13th consecutive month of employment contraction, at a slower rate compared to July. An Employment Index above 50.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
  5. Of the 18 manufacturing industries, the eight industries to report employment growth in August — in the following order — are: Textile Mills; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Computer & Electronic Products; Fabricated Metal Products; and Miscellaneous Manufacturing. The seven industries reporting a decrease in employment in August, in the following order, are: Printing & Related Support Activities; Petroleum & Coal Products; Primary Metals; Furniture & Related Products; Transportation Equipment; Paper Products; and Chemical Products.
  6. The Inventories Index registered 44.4 percent in August, 2.6 percentage points lower than the 47 percent reported for July. Inventories contracted for the second straight month after two consecutive months of expansion. This is the lowest reading for the Inventories Index since January 2014 (43.9 percent). “Inventory levels were impacted by increases in production output and restrained by continuing supplier difficulties."

The above condensed from the ISM Report on Business for August.

Markit vs ISM

IHS Markit reports Manufacturing Strengthens but Small Firms are Still Suffering

"Firms indicated a renewed rise in employment for the first time since February. The rate of employment growth was the joint-fastest since March 2019," according to Markit.

What to Make of the Huge Difference Between ISM and Markit?

On August 5 I asked, What to Make of the Huge Difference Between ISM and Markit?

  • ISM New Orders are Up, Employment Down
  • Markit New Orders are Down, Employment Up

Those points are for services, not manufacturing.

Diffusion Indexes

With diffusion indexes, a company hiring one employee counts as much as another firing 300 or even 3,000. Factor in a small sample size and the ability of companies to not waste time responding to surveys and the reports might look like (and do look like) complete nonsense.

Discrepancies Yet Again

Nearly every month there is a huge discrepancy between ISM and Markit although the reports purportedly measure the same thing.

For there to be this radical of a difference suggests one or both of these companies have a severe industry weighting problem.

Mish