WASHINGTON, Oct 1 (Businesshala) – US manufacturing activity accelerated further in September, but factories experienced more delays in raw material deliveries and paid higher prices for inputs.
The Institute for Supply Management (ISM) on Friday said the national index of factory activity rose to 61.1 from 59.9 in August last month.
A reading above 50 indicates expansion in manufacturing, which accounts for 12% of the US economy. Economists polled by Businesshala had forecast the index to fall to 59.6.
The somewhat surprising rise in the ISM index, however, was due to a jump in the survey’s measure of supplier delivery, to a reading of 73.4 from 69.5 in August last month.
A reading above 50 percent indicates slower deliveries, but lengthening suppliers’ delivery times, typically linked to a stronger economy and increased customer demand, will be a positive contributor to the ISM Index. But slow supplier deliveries in this case indicate a persistent shortage of supplies related to the COVID-19 pandemic.
This was underscored by a rebound in the measurement of prices paid by survey makers, from an eight-month low of 79.4 in August to 81.2. The Federal Reserve last week raised its forecast for its key inflation measure this year to 3.7%. This was above the average of 3.0% estimated in June. The US Central Bank has a flexible 2% inflation target.
In addition to the technical lift from supplier delivery measurements, manufacturing is strong.
The ISM survey’s forward-looking new orders sub-index was conducted last month at a reading of 66.7. Manufacturing is being curtailed by businesses desperate to rebuild stocks after inventory runs out in the first half of the year.
The measure of customer inventory surveys remained in contraction territory in September.
A gauge of factory employment rebounded last month to its lowest level since November after falling in August. This suggests that manufacturing payrolls are likely to grow in September after slowing in the previous month.
The Labor Department is due to release its closely watched employment report next Friday.