A strengthening manufacturing sector is fueling expectations
that the U.S. economy will expand at a more robust clip in the second half of
the year. But manufacturers are concerned that international turmoil could
temper the rebound. The Institute for Supply Management said Tuesday its
purchasing managers' index—a compilation of readings on orders, production,
employment, supplier deliveries and inventories—climbed to 59.0 in August, from
57.1 in July.
Economists had expected the gauge to fall, but instead the
latest reading rose to its best showing since March 2011. Another factory
survey showed manufacturing activity in August was the busiest since April
2010. The ISM said 17 of the 18 industries surveyed reported growth in August.
The upbeat factory numbers bolstered the view of many economists
that the U.S. economy is picking up steam in the second half of the year. A
large 1.8% gain in construction spending in July, according to a Commerce
Department gauge released Tuesday, also adds to expectations of faster growth.
It is projected that the economy will grow at an annual rate
of 3.2% this quarter and will surge at a 4.6% pace in the fourth quarter, led
by faster wage growth and better government spending. Real GDP expanded at
about a 1.1% annual rate in the first half. Within the ISM factory report, many
indexes hit or held near multiyear highs last month.
The August new-orders index increased to a 10-year high of
66.7. The production index rose to 64.5, the best reading since May 2010. The
employment index was virtually unchanged at 58.1 from the three-year high of
58.2 hit in July.
Economists surveyed by The Wall Street Journal expect total
nonfarm payrolls increased by 225,000 new jobs last month, better than the
209,000 positions added in July. The August jobless rate is forecast to tick
down to 6.1% from July's 6.2%.
Demand in the eurozone and China is slowing, holding down
foreign sales. The ISM exports index increased to 55.0 in August from 53.0 in
July, but both readings are below the 55.6 averaged in the first half of 2014. Some
economists caution that unless foreign demand picks up, the upbeat factory
numbers won't last.
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