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The numbers: American manufacturers grew again in August for the fourth straight month, but companies still aren’t bringing back lots of workers or seeking to increase investment with the coronavirus pandemic still weighing heavily on the economy.
The Institute for Supply Management said its manufacturing index rose to 56% in August from 54.2% in July. Readings over 50% indicate growth
Economists surveyed by MarketWatch had forecast the index to total 54.9%.
Althought the index hit a 21-month high, manufacturers aren’t doing as well now as they were two years ago. Businesses executives are asked if their companies are doing better or worse compared to the prior month, but the survey doesn’t reveal how much better.
Most manufacturers are producing fewer goods with fewer workers than they were before the coronavirus pandemic. The index had fallen to an 11-year low of 41.5% in April during the height of the crisis.
Also:‘A massive welfare economy’ – federal aid prevents even steeper GDP collapse
What happened: New orders and production both rose in a good sign for the economy.
The index for new orders jumped to 67.6% from 61.5%, marking the highest level since 2004. Yet other measures of actual production show new orders are still below precrisis levels.
The production gauge rose to 63.3% from 62.1%.
While the employment gauge also increased, manufacturers are still reducing hours and payrolls because of softer domestic and foreign demand for their products. The employment index crept up to 46.4%, but any number below 50% is a negative sign.
Read:Job trouble? Wave of rehiring after economy reopened to fade in July after viral spiral
Fifteen of the 18 industries tracked by ISM expanded in August up from 13 in the prior month.
The ISM index is compiled from a survey of executives who order raw materials and other supplies for their companies. The gauge tends to rise or fall in tandem with the health of the economy.
See: MarketWatch Economic Calendar
Big picture: Manufacturers are outperforming other key segments of the economy, but not enough to bring back more workers or to justify new investments.
Many companies are waiting to see how much the economy improves and whether the coronavirus recedes before taking more aggressive measures. The cautionary approach is likely to act as a restraint on the recovery
See:MarketWatch Coronavirus Recovery Tracker
Market reaction: The Dow Jones Industrial Average DJIA, +0.12% and S&P 500 SPX, +0.25% rose modestly in Tuesday trades.
