American manufacturing expanded last month at the fastest pace in 13 years, in part because of effects from two major hurricanes, figures from the Institute for Supply Management showed Monday.
HIGHLIGHTS OF ISM MANUFACTURING (SEPTEMBER)
Factory index climbed to 60.8 (est. 58.1), the highest since May 2004, from 58.8; readings above 50 indicate expansion
Measure of new orders increased to 64.6, the strongest since February, from 60.3
Employment gauge rose to 60.3, the best reading in more than six years, from 59.9
Index of prices paid advanced to 71.5, the highest since May 2011, from 62
The strength of the advances in the ISM’s gauges partly reflects impacts from hurricanes Harvey and Irma. Harvey forced the shutdowns of Houston-area refineries and chemical plants. Many retail establishments, including car dealerships, were flooded in the storms and merchandise was destroyed.
Timothy Fiore, the ISM survey committee chairman, said on a conference call that the most direct impact from the storms was in the supplier deliveries index, indicating longer lead times; that gauge factors into the overall index. Survey respondents also mentioned that they received new orders because of the hurricanes, further boosting the headline number.
Seventeen of 18 industries reported growth in September; only furniture makers showed contraction, according to ISM.
While increased factory bookings and production may also reflect a bounce-back from the storm, the nation’s producers had already been on firmer footing because of improving global demand and an increase in U.S. capital spending. The ISM also reported a pickup in its measure of exports as producers benefit from a U.S. dollar that’s weakened this year, making American-made goods more attractive to overseas purchasers.
Orders will probably remain strong in coming months as a gauge of customer inventories held close to a six-year low. What’s more, the ISM’s order backlogs index crept up to the highest level since April 2011, helping explain why more factories are stepping up hiring.
“Much of the increase in the headline measure was related to a 7.3-point surge in the supplier deliveries index,” Daniel Silver, an economist with JPMorgan Chase & Co., said in a note. “But even away from this index, many of the other survey components pointed to strength in the manufacturing sector, including increases in the measures of orders, production and employment.”
Index of supplier deliveries increased to 64.4, the highest reading since July 2004, from 57.1; figure shows longer lead times as producers have trouble meeting demand
ISM production measure rose to three-month high of 62.2 in September from 61
Measure of export orders climbed to 57 from 55.5
Gauge of order backlogs rose to 58 from 57.5