It’s hard to interpret today’s report on manufacturing from the Institute for Supply Management because of the damage inflicted on the U.S. economy by hurricanes Harvey, Irma, and Maria, but it certainly looks like the economy is strengthening,.
The ISM factory index climbed to 60.8 in September –economists surveyed by Bloomberg had expected a reading of 58.1. This it the highest level for the index since May 2004 and it’s up from 58.8 in August. (In this index any reading above 50 indicates that the economy (or the manufacturing or service sector) is expanding. The index’s reading for new orders climbed to 64.6, the strongest since February.
The increase in orders is certainly partly a reflection of reordering after the damage inflicted by the storms. The delivery index was also up, as factories took longer to fill orders. That gets figured into the overall index, boosting the number.
But with the index’s measure of customer inventories holding near a six-year low and order backlogs moving up to their highest levels since April 2011, it does look like the economy is showing greater real strength beyond the effects of the storms. That strength also shows up in the gauge for exports, which climbed to 57 fro 55.5.
The strength in the U.S. economy was echoed in news today from China and Japan. The Bank of Japan’s quarterly Tankan survey showed confidence among big manufacturers at decade highs. Measures of factory output rose more than expected in China.
All this led to yet another record high for the Standard & Poor’s 500 Stock Index and a rally in the U.S. dollar, which pushed the currency to its highest level since July. The dollar was also helped by weakness in the euro as a result of the crisis in Spain over an independence referendum in Catalonia.