US ISM: Activity expands at the fastest pace in more than a decade  - Wells Fargo

Trade tensions do not appear to be having a meaningful adverse effect on production and cap-ex plans, but price pressures remain elevated, explained analysts at Wells Fargo, regarding today’s ISM report. 

Key Quotes: 

“There was no summer vacation at the nation’s manufacturing facilities in August. The ISM manufacturing index strengthened to 61.3 last month, its highest reading in 14 years. August’s jump puts the ISM closely in line with already-released regional purchasing managers’ indices and offers more evidence that manufacturing is doing more than simply “holding up” in the face of an uncertain trade environment.”

“These euphoric readings are not typically sustainable, especially in a strong-dollar environment, and a case could be made that the regional Fed survey, while still high, are beginning to roll over.”

“While contacts made numerous mentions of tariffs in the August ISM report, trade has not appeared to faze activity. The index on current production posted one of the biggest jumps of the month, increasing to 63.3 from 58.5 in July.”

"With activity expanding at the fastest pace in more than a decade, it is not surprising to see manufacturers bringing on more workers. Job growth in the manufacturing sector has been on a tear this year, with factories hiring an average of 28,000 workers per month since January. The last time that sort of pace was seen was in 1998.”

“Amid solid activity and the recent tariffs, however, price pressures remain elevated. The prices paid component edged down 1.1 points in August, but sits at a still-high 72.1. Respondents noted suppliers were passing on price increases associated with tariffs, and that tariffs were now getting baked into negotiations for selling prices in the year ahead.”