Dollar rally accelerates on much stronger than expected manufacturing data. ISM manufacturing index rose to 61.3 in August, up from 58.1 and beat expectation of 57.8. That’s also the highest level since May 2004. Prices paid index dropped to 72.1, down from 73.2 and missed expectation of 74. Employment component improved 2 points from 56.5 to 58.5.
ISM noted in the released that
- Comments from the panel reflect continued expanding business strength.
- Demand remains strong, with the New Orders Index at 60 percent or above for the 16th straight month, and the Customers’ Inventories Index remaining low.
- The Backlog of Orders Index continued to expand, at higher levels compared to the previous month.
- Consumption improved, with production and employment continuing to expand, at higher levels compared to July, despite shortages in labor and materials.
- Inputs (expressed as supplier deliveries, inventories and imports) expanded strongly due to continuing supply chain inefficiencies, positive increases in inventory levels and a slight easing of imports. Lead-time extensions, steel and aluminum disruptions, supplier labor issues, and transportation difficulties continue, but at more manageable levels.
- Export orders expanded at stable levels.
- Prices pressure continues, but the index softened for the third straight month and remains above 70.
- Demand is still robust, but the nation’s employment resources and supply chains continue to struggle.
- Respondents are again overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will impact company revenue and current manufacturing locations. Panelists are actively evaluating how to respond to these business changes, given the uncertainty.