US manufacturing activity is strongest in August in nearly two years


FILE PHOTO: Line Workers welded parts of the frame on the Flex line at Nissan Motor Company’s automobile manufacturing plant in Smyrna, Tennessee, US, on August 23, 2018. REUTERS / William Dasher

WASHINGTON (Reuters) – US manufacturing activity accelerated to a nearly two-year high in August amid new orders, but a steady decline in employment, noting that the labor market recovery is losing momentum.

The Institute for Supply Management (ISM) said on Tuesday that the national factory activity index rose to 56.0 from 54.2 in July last month. It was the highest level since November 2018 and marked three straight months of growth.

A reading above 50 indicates expansion in manufacturing, which accounts for 11% of the US economy. Economists predicted by Reuters had estimated that the index would rise to 54.5 in August.

But continuous improvement in manufacturing is uneven, as the COVID-19 epidemic shies away from spending the purchase of items used in service industries such as household electronics from restaurants and bars.

ISM’s new-look new order sub-index reached 67.6 in August, the strongest in July 2017, since December 2017. Surveys ordered for export as measurements in factories of backlog orders.

Although factory employment continued to improve last month, it remained in the contraction zone. ISM became a manufacturing employment measure with a reading of 44.3 to 46.4 in July.

Factory employment declined even before the coronovirus crisis caused by the Trump administration’s trade war with China. The struggle for its rebirth, according to orders received by factories, fits with economists’ views that the labor market was becoming steamy due to the reopening of businesses in May.

According to a Reuters poll of economists, the government’s employment report, released on Friday, is expected to show 1.4 million jobs created in August, adding 1.763 million in July. This would leave less than 11.5 million non-payrolls below their pre-epidemic levels.

(This story corrects the historical in the headline, first and second paragraphs and adds dropped words)

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama

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