ISM Key Points
- 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.
- 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.
- 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.
- 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.
- 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.
- 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
I was told by a banker that bad loans will have to be declared in January. The administration is just extending and pretending.
What’s the incentive for more stimulus ? Both parties have different reasons to not do anything.
the deficit myth https://www.youtube.com/watch?time_continue=85&v=d_udbs-wuDA&feature=emb_logo
Hhmm, she’s has to be a professor somewhere … no one else could be that clueless.
Taxation serves several purposes. 1) a redistribution of wealth. 2) a way to control behavior. Tax less of something will encourage. Tax more of something will discourage.
The other problem with MMT is it will never be enough … and will ultimately lead to loss of store of value for $US. If a $3 trillion deficit doesn’t implode the $US … they will clamor for ever higher deficits … until ultimately no one, including our trading partners, will want to hold.
The reason QE has “worked” so far is that – in theory – reversible as balance sheet only $7 trillion. At $30 trillion? $40 trillion? At SOME point there will be loss of faith in $US.
She cares not a wit on soundness of money.
So, if money is no problem, why are there millions of people living in poverty all around the country? Why are there homeless people all over L.A. Seattle and most large cities. Why aren’t they getting money or services?
Oh, and by the way, we have not been in the longest peace-time economy in history, we have been at war, in the middle east for the last 30 years.
Wake up Stephanie!
There is widespread income disparity partly due to these exact policies. Much more often than not, all that easy peasy stimulus money(deficit spending) ends up in the pockets of the wealthy. Regulatory capture, crony capitalism and corruption have succeeded.
We do have socialism in this country, but it is only for the rich and powerful…… the rest get disaster capitalism. Yes we have social safety net stuff, but it is just above pauper level.
The ISM attributes each of these variables the same weighting when calculating the overall PMI, whereas Markit uses the following weights: production (0.25), new orders (0.30), employment (0.20), supplier deliveries (0.15), and inventories (0.10).
This comment dovetails with what I said yesterday about many businesses holding on (barely) for next stimulus … and if not robust will throw in the towel.
NYT today:
“I can survive because I’m betting on another stimulus package,” said Candace Combs, who runs the In-Symmetry Spa in San Francisco with her brother. “But without that, we start to really teeter.”
All these surveys are muddied by fiscal stimulus / forbearance / moratorium.
Now that there waning true economy will be revealed in next few months (unless another massive fedgov stimulus. But put me down for a skinny version as August NFP will likely be decent and GDPNow expects Q3 growth of +28.5%).
As a case in point, Federal (CARES Act) rent eviction lasted till near end of July, but then landlord had to file notice to vacate and wait 30 days before filing for eviction (August 25th earliest day to file). Now, many states have their own eviction moratoriums, but many have ended or about too.