Measures from the Institute for Supply Management Show Continued Economic Growth
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by Raymond J. Keating-
Good economic news came from the Institute for Supply Management’s reports this week.
First, the ISM manufacturing Index came in at 59.8 percent for September. Now, that was down from 61.3 percent in August. However, it needs to be pointed out that the August level was the highest since May 2004. For good measure, any level above 50 percent means that activity is expanding. So, the August number is still strong.
According to Timothy R. Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee:
“Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index at 60 percent or above for the 17th straight month, and the Customers’ Inventories Index remaining low. The Backlog of Orders Index continued to expand, but at lower levels compared to the previous month. Consumption improved, with production and employment continuing to expand, at higher levels compared to August, despite shortages in labor and materials.”
Second, the ISM Non-Manufacturing Index hit 61.6 percent in September, which was an all-time high for this index, and up from August’s 58.5 percent. Anthony Nieves, Chair of the Institute for Supply Management Non-Manufacturing Business Survey Committee, pointed out:
“This represents continued growth in the non-manufacturing sector at a faster rate and is an all-time high for the NMI since the inception of the composite index in 2008. The Non-Manufacturing Business Activity Index increased to 65.2 percent, 4.5 percentage points higher than the August reading of 60.7 percent, reflecting growth for the 110th consecutive month, at a faster rate in September. The New Orders Index registered 61.6 percent, 1.2 percentage points higher than the reading of 60.4 percent in August. The Employment Index increased 5.7 percentage points in September to 62.4 percent from the August reading of 56.7 percent.”
As for the most glaring problem or challenge, trade issues were highlighted in both reports. Fiore noted:
“Respondents are again overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will impact company revenue and current manufacturing locations.” And Nieves said, “Overall, respondents remain positive about business conditions and the current and future economy. Concerns remain about capacity, logistics and the uncertainty with global trade.”
These observations speak to the reality that on the public policy front the only major uncertainty or threat right now comes on the trade front. If the Trump administration moves away from imposing tariffs, this policy negative would turn into yet another – along with tax and regulatory relief – policy positive.
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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.