U.S. Factory-Sector Activity Hits Six-Year High -- Update

By Josh MitchellFeaturesDow Jones Newswires

Manufacturing activity in the U.S. reached a six-year high in August, with factories continuing to register a big rise in sales and boosting hiring in response.

The Institute for Supply Management said Friday its index of factory activity rose to 58.8 in August from 56.3 in July, hitting the highest level since April 2011. A reading above 50 indicates sector expansion, as measured by factors such as sales, output and hiring.

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The reading exceeded economist expectations and suggests stronger global growth, a soft dollar, a booming stock market and rising consumer and business confidence are boosting American manufacturers.

"With global growth strong and the dollar quite soft, U.S. exporters ought to be gaining market share," said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients.

Timothy Fiore, head of the ISM survey, said the factory sector appears to be shifting toward stronger growth after a year and a half of steady expansion. Sales have climbed quickly in recent months, a development he attributed to stronger economies overseas and pent-up demand in the U.S. for goods ranging from petroleum to computers.

Manufacturers are also reporting higher prices for raw materials, hinting at growing inflation pressures. "This is probably pent-up demand over many, many years," Mr. Fiore said. He said he believes Hurricane Harvey may temporarily hurt factories by delaying deliveries of supplies and driving up prices but that he expects growth to continue through the year.

Friday's report showed a sharp rise in hiring among manufacturers. Sales continued to climb rapidly, though at a slightly slower pace from the prior month. A measure of exports slipped but continued to indicate growth.

Based on historical data, factory-sector activity this year corresponds with a 4.2% annualized growth in overall U.S. output, the ISM said.

U.S. output grew at a roughly 2% annual rate in the first half of the year, though the economy has gained momentum as the year has unfolded. Output grew at a 3% rate in the second quarter and some economists expect similar or greater growth in the current quarter.

Write to Josh Mitchell at joshua.mitchell@wsj.com

(END) Dow Jones Newswires

September 01, 2017 11:34 ET (15:34 GMT)