August 2018 Institute for Supply Management

Output accelerated in August 2018 according to data from the Institute for Supply Management.  Manufacturing’s reading increased to 61.3 from an already hot 58.1.  Likewise, services jumped to 58.5 from 55.7.  Remember, readings above 50 for these indicators are acceptable, so America’s economy appears to be moving along swimmingly.

Both current and forward-looking components soared on the factory side of the economy.  Manufacturing production jumped 4.8 points to 63.3, boding well for third-quarter 2018 gross domestic product (GDP).  And there appears to be more where that came from as new orders leapt 4.9 points to 65.1. Factory sector growth seems poised to end the year well.  Additionally, employment increased for this cyclically sensitive portion of the economy.

Non-manufacturing’s coincident and forward-looking components were impressive as well.  Business activity accelerated to 60.7, adding 4.2 in the period which should goose the GDP tally in the current quarter.  New orders should keep that activity high in the months ahead as it accelerated as well, reaching 60.4 from 57.0 in July.  The backlog of orders increased as well; this should keep output humming along as firms play catch-up in the near term.

America’s economic expansion is alive and well.  From the vantage point of the ISM, both sides of output are increasing robustly.  Goldilocks comes to mind when considering this and other indicators together.  Domestic output isn’t facing any difficulties, leading components forecast more of the same, and various measures of inflation remain relatively tame but upward sloping.  Central bankers in Washington D.C. are taking advantage of this period’s window of opportunity by, among other things, raising the overnight lending rate, something they are likely to continue next week after the Federal Open Market Committee meets.