WASHINGTON, DC — Gains in manufacturing boosted the U.S. expansion in August, led by a surge in orders for plastics and metals that powered the world’s largest economy past a global slowdown.
The Institute for Supply Management’s index unexpectedly climbed to 59, the highest level since March 2011, from July’s 57.1, beating all forecasts in a Bloomberg survey of economists. The orders gauge was the strongest in a decade, the Tempe, Arizona-based group reported today.
American factories are benefiting from a rebound in auto sales and stronger business spending on new plants and equipment that are helping industries rise above the political tensions weighing on Europe. Faster wage growth is now needed to sustain the advance and broaden household purchases beyond automobiles.
“The manufacturing sector is just on fire right now,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, whose ISM forecast at 58.5 was the highest in the Bloomberg survey. “You’ve got increased demand for workers, and the more people working, and the more money they are making, the more money they’ll spend.”
Stocks fell, after the Standard & Poor’s 500 Index had its best month since February, as energy producers sank with the price of crude. The S&P 500 dropped 0.1 percent to 2,002.28 at the close in New York.
The news on manufacturing was less positive overseas. U.K. factory growth slowed more than forecast last month and Italian manufacturing shrank as Europe suffered the fallout from weakening demand and mounting geopolitical risks in Ukraine and the Middle East, other reports showed this week.
“We’ve been dealing with the fragile European recovery for years now, and we seem to be moving right through it,” Bradley Holcomb, the ISM survey chairman, said in an interview. There’s a chance the U.S. won’t see a “discernible impact,” though if things escalate, that could change, he said.
The median forecast in a Bloomberg survey of 78 economists was 57 for the U.S. ISM index. Estimates ranged from 55 to 58.5. Readings greater than 50 indicate growth.
17 of 18 industries surveyed by the purchasing managers’ group grew last month, led by plastics, furniture and metals.
To read the full report, visit www.bloomberg.com/news/2014-09-02/manufacturing-in-u-s-expands-at-fastest-pace-in-three-years.html.