WASHINGTON - US manufacturing surged in August, showing surprising strength in a normally tepid month and despite continued fears about the impact of trade tariffs, according to an industry survey Tuesday.
New orders, production and employment all grew solidly compared to July, with contributions from 16 of the 18 industries surveyed, and especially large gains from the six big industries, according to the Institute for Supply Management's closely-watched survey.
But half the executives continue to express concerns about the US exchange of tariffs and counter-tariffs affecting prices of inputs and sales, and many are starting to think about alternate production plans, said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.
"There are big uncertainties over where they should be manufacturing next year, and where they should be buying their product," Fiore told reporters in a conference call. "The tariff issue is still not settled, and we don't know where it's going," he said, adding that "companies doing a lot of studying to make sure they can protect exports."
In a month where output normally would be expected to slow, ISM's Purchasing Managers Index for US manufacturing jumped to a 14-year high of 61.3 percent, an increase of 3.2 points from the prior month. It was the 24th consecutive month of growth, and defied analysts' expectations for a modest decline. Any score above 50 percent indicates growth.
Meanwhile, the index for new orders jumped nearly five points to 65.1 percent, as did production which hit 63.3 percent, while employment gained two points to 58.5 percent. The trade tensions created by President Donald Trump's aggressive tariff policy have been stoking price pressures in recent months for steel and aluminum, as well as numerous other materials. The price index slipped a point to a still-high 72.1 percent.
Fiore said he is less confident companies will be able to pass higher prices along to their consumers, but that will become evident when executives present their quarterly results or start to give profit warnings.
Still, the August performance was a pleasant surprise, showing "the economy is continuing to power forward," Fiore said, which bodes well for the third quarter.
However, companies also continued to report difficulty filling open positions.