ISM: expansion gains, price pressures still high in Aug.

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The overall economy grew for the 112th straight time, the Institute for Supply Management reported Tuesday.

According to the ISM's monthly report on business, the ISM index increased to 61.3 in August from 58.1 in July.

Economists polled by IFR Markets predicted the index would be 57.7.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion. A reading of 50 shows the sector was unchanged in the month.

The prices paid index decreased to 72.1 from 73.2, indicating higher raw materials prices for the 30th consecutive month. The employment index grew to 58.5 from 56.5.

The production index rose to 63.3 from 58.5, the new orders index gained to 65.1 from 60.2; the supplier deliveries index climbed to 64.5 from 62.1; the export orders index slid to 55.2 from 55.3; and the imports index declined to 53.9 from 54.7.

The inventories index rose to 55.4 from 53.3; the customers' inventories index increased to 41.0 from 39.4; and backlog of orders jumped to 57.5 from 54.7.

Respondents' comments included:

  • “Busy for new orders, but the cost of raw material chemicals keeps going up.” (Chemical Products)
  • “We have seen a slight uptick in international business. Suppliers do not seem to know how to handle the recently imposed tariffs. Most are waiting to re-evaluate potential price increases until September.” (Computer & Electronic Products)
  • “Generally high levels of demand continue, and [we are] planning for this elevated rate through the rest of the year.” (Transportation Equipment)
  • “Suppliers appear to be bracing us for cost increases, given increased talk of tariffs and inflation. We are budgeting for 2019 accordingly.” (Food, Beverage & Tobacco Products)
  • “The toughest thing we deal with is the unknown. Dealing with tariffs on steel purchases and not knowing if or when they will end makes planning difficult. We are entering the period when we begin our pricing negotiations for next year and will likely treat the tariffs as if they will be here for the entire year. It’s challenging, but not insurmountable.” (Fabricated Metal Products)
  • “Business is positive, new equipment sales and inquiries are strong, and the parts business is strong. Raw material costs, especially steel, appear to be leveling off. Cost of manufactured components has also leveled off. Most suppliers are willing and able to suppress cost increases. Tariff impacts are still a concern.” (Machinery)
  • “Business continues to be strong. We anticipate growth in the next few months.” (Plastics & Rubber Products)
  • “Business conditions are strong. Orders are up. Purchase prices are up. Unemployment is down.” (Miscellaneous Manufacturing)
  • “Continued strong demand has most locations in a sold-out market, putting pressure on our facilities to produce and have strong uptime. Purchasing is under pressure to provide critical parts in a market where lead times have increased.” (Nonmetallic Mineral Products)
  • “Steel tariffs and their threats are putting upward pressure on downstream materials.” (Petroleum & Coal Products)
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Economic indicators Manufacturing industry