TEMPE, AZ—U.S. manufacturing unexpectedly jumped to the highest since May 2004 as orders, production and employment all picked up, even as companies contend with potential complications from trade tariffs, according to the Institute for Supply Management's (ISM) August report.
Bloomberg News says that the report shows factory demand is strengthening in the third quarter and adds to signals that the nearly decade-old expansion will hold up well in the second half of 2018. The rise in the employment gauge also suggests manufacturers may record another month of solid payroll gains in Labor Department figures due this Friday.
At the same time, the gauges of exports and imports may indicate that months of intensifying tensions are taking a toll on trade. Negotiations with Canada to modernize the North American Free Trade Agreement ended without a deal by last Friday’s deadline, though talks are scheduled to resume Wednesday. President Donald Trump wants to move ahead with tariffs on $200 billion of Chinese imports as soon as a public-comment period concludes Sept. 6, according to people familiar with the matter.
“The economy is continuing to power forward despite some of the other issues,” says Timothy Fiore, chairman of the ISM manufacturing survey.
While the third quarter traditionally is when companies plan investment for the following year, Fiore said, some are likely hesitant to make major capital commitments when the economic cycle is in its later stages and faces headwinds from trade tariffs, a labor shortage and supply constraints. Some are already re-evaluating their manufacturing footprint and supply chain, he says.