The defining challenges of the COVID era improved in August according to the latest ISM survey, says analysts at Wells Fargo. They point out wait times are shortening, inventories are being rebuilt and orders remain strong. The exception is regarding the labor market as businesses cannot find the people to work at factories.
Key Quotes:
“The takeaway from today's ISM report for the month of August is that the manufacturing sector is finding ways to thrive even in a very difficult environment.”
“The overall index rose slightly to 59.9, despite expectations for decline in the bellwether of industrial activity. Critically, new orders notched a gain of 1.8 points to reach 66.7, indicating the demand backdrop remains quite strong.”
“The employment component slipped back into contraction territory at 49.0. This still appears to be more of a supply problem than a demand issue.”
“The difficulty finding labor in August is warning sign that Friday's headline number will not likely get much help from manufacturing payrolls and that a lack of labor remains a challenge to hiring more broadly. In light of this, we have dialed back our August payroll number to an increase of 750K.”
“Those in agreement with the Fed that inflation is transitory will seize upon the fact that the prices paid index posted a 6.3-point drop, the largest decline of any subcomponent. Even after that drop though, this leading indicator for factory gate prices is still at 79.4, which suggests continued price pressure, just somewhat less intense than last month.”
