US ISM PMI print a pleasant surprise as new orders show strength

(Alliance News) - The manufacturing sector in the US held up reasonably well, analysts said on Thursday, as new orders saw growth for the first time in two months.

The Institute for Supply Management on Thursday said manufacturing sector activity remained flat, as new orders started to pick up.

The ISM manufacturing PMI remained at 52.8 index points in August compared to July, beating market forecasts, cited by FXStreet, of 52.0. The reading remained at the weakest rate since June 2020.

"The ISM manufacturing index held up better than expected in August," ING's Chief International Economist James Knightley said.

"Mixed regional indicators and a softer China PMI had raised warning flags, but instead new orders moved back into positive territory at 51.3 from 48 while employment rose to a five month high of 54.2, boosting hopes of a decent manufacturing contribution to Friday's jobs number. Regarding jobs, the ISM reported that 'companies continued to hire at strong rates in August, with few indications of layoffs, hiring freezes or head-count reductions through attrition'. Panelists reported lower rates of quits, a positive trend."

Oxford Economics said the growth in new orders points to a "fuller pipeline".

"The pipeline for future activity was more encouraging as new orders jumped back into expansion territory after two months of contraction - in part because supply-side constraints eased," it added. "Overall, the data point to a healthier balance between demand and supply within manufacturing last month."

Capital Economics said the print provides "some further reassurance that the economy is not yet sliding into recession."

ING noted the US looks set to report GDP growth of 3% in the third quarter.

Knightley said: "Decent manufacturing activity, improved trade and inventory contributions and the cashflow boost from falling gasoline prices mean the US is set for a strong third-quarter GDP reading of around 3%, but another decline in residential construction reinforces the worries about what might happen later in the year."

Separately, the S&P Global US manufacturing purchasing managers' index was revised higher to 51.5 points in August from a preliminary reading of 51.3, but was down from 52.2 points in July.

The latest index reading was the lowest since July 2020, and signalled muted operating conditions in the manufacturing sector.

New orders fell for the third months in a row, as firms reported a modest decline in new sales on muted client demand following greater economic uncertainty and price hikes. Export orders fell at the second sharpest rate in 27 months.

By Paul McGowan; [email protected]

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