August 2017 Institute for Supply Management

Output on both sides of the American economy accelerated in August according to the two figures from the Institute for Supply Management (ISM). Manufacturing’s tally increased to 58.8 from an already strong reading of 56.3 in July. On the service side of output, the non-manufacturing total reached 55.3 after the prior count of 53.9. Readings this high suggest the economy is in good shape.

Data beneath manufacturing’s headline were strong. At 61.0, production’s tally, a coincident indicator for the economy, posted its third consecutive greater than 60 reading. Likewise, new orders’ (a forward looking component) tally of 60.3 was also above 60 for the third month in a row. As Atlas mentioned here in our note regarding the jobs report, manufacturers accelerated hiring in August, and ISM data confirms the increase with the employment figure reaching 59.9.

Non-manufacturing data were strong beneath the headline as well. Increasing 1.6 to 57.5, business activity bodes well for current quarter gross domestic product. New orders grew 2.0 and reached 57.1, so service firms have a growing pipeline of business. Finally, employment also improved in this segment of the economy.

Third quarter GDP seems to be getting off to a good start. There have been two positive ISM reports thus far in the period. Additionally, personal consumption (read Atlas’ note on it here) shows the largest segment of our economy is growing (even if it’s at a cost to America’s savings rate). As subsequent information is released, we’ll know more about our current quarter, but the data have been constructive thus far.