September 4, 2007 – The ISM diffusion index of U.S. manufacturing activity fell by 0.9 index points to 52.9 in August, but continued to signal reasonably healthy growth in U.S. manufacturing activity (Chart 1).
According to the ISM press release, August’s index level is historically consistent with a 3.4% trend in real GDP growth.
The press release said, “Both the New Orders Index and the Production Index are encouraging for continuing growth as we head toward the fourth quarter of 2007.”
The ISM index of manufacturers’ new orders fell by 2.2 index points to 55.3 in August (Chart 2). At the same time, the manufacturing production index edged up by 0.5 index points to 56.1. Both of these indices continued to signal good solid growth in August.
The ISM input price index fell by 2 index points to 63.0 in August, but continued to signal strong growth in manufacturers’ material input costs (Chart 3). These data suggest that inflationary cost pressures may be abating, but they have not yet gone away.
The ISM employment index rose by 1.1 index points to 51.3 in August. That might be a good omen for August growth in manufacturers’ payroll jobs (coming Friday). Manufacturers’ payrolls were about unchanged in July, edging down by 2K.
Bottom line: as of August, the manufacturing sector did not seem to be in need of easier U.S. monetary policy.