By Paul Hannon and David Harrison
U.S. factory output continued to grow in August, according to a pair of surveys released Tuesday, but the picture for employment was mixed, a possible sign of lingering uncertainty about the coronavirus pandemic among American manufacturers.
Sluggish employment, if sustained, could pose a threat to the recovery just as the economy is starting to pick up following several months of pandemic-related lockdowns. Other manufacturing powerhouses such as China and Germany also saw continued contraction in factory employment.
A survey of purchasing managers in manufacturing compiled by the Institute for Supply Management found that U.S. factory output grew in August at the fastest pace since November 2018, driven by a surge of new demand and faster export orders. An index of output posted a reading of 56 in August, up from 54.2 in July, ISM said.
But firms continued to cut employment, reflecting a wariness about future prospects and health concerns that have prompted employers to try to put more space between each worker on production lines.
A separate survey published by data firm IHS Markit, however, found employment in U.S. factories growing at the fastest pace since November 2019 while overall output grew at the fastest pace since January of last year. The firm said its U.S. manufacturing index posted 53.1 in August, up from 50.9 in July.
A reading above 50 indicates an increase in activity over the previous month, while a reading below that mark points to a decrease.
Both surveys found that demand had picked up as the economy continued to reopen following the lockdowns imposed in the spring and early summer to slow the spread of the new coronavirus. An ISM index of new orders posted a reading of 67.6 in August, the fastest pace of growth since January 2004.
Tim Fiore, who runs the ISM’s manufacturing surveys, said he had been surprised by the surge in new orders in August and had high hopes for the coming months.
“I don’t see why this wouldn’t continue, maybe not at this strength,” he said. “I think we’re on a good path.”
Mr. Fiore said he expected employment to pick up as output grows but there were signs of concern, particularly in industries such as airplane manufacturing that had been hard hit by the pandemic.
“It’s getting better but I’m very concerned now about the permanent layoffs,” he said.
Boeing Co. has already said it would cut 19,000 jobs and warned in July that more may be on the way.
Overall, there are almost 800,000 fewer manufacturing jobs in the U.S. than there were before the pandemic, when the sector counted almost 12.9 million jobs, according to the Labor Department.
Other countries also saw a rebound in output. IHS Markit said its Caixin Purchasing Managers Index for Chinese manufacturing rose to 53.1 in August from 52.8, pointing to the fastest expansion in activity since January 2011.
Germany, Europe’s industrial powerhouse, also recorded a stronger recovery, as its PMI rose to 52.2 in August from 51.0 in July, the highest level in almost two years. Even with a revival in previously weak export orders in China and Germany, manufacturers in each country reported that they were cutting jobs.
The reduction in factory payrolls outside the U.S. was widespread, with only Myanmar and Turkey seeing a rise in manufacturing employment. That suggests that manufacturers are doubtful that the August recovery in output will be sustained.
There were also setbacks in factory outputs for countries that have seen sharp rises in new infections, and the reintroduction of some restrictions that had previously been lifted. They included Spain, Vietnam and the Philippines.
Retail sales in major markets such as the U.S. and Europe rebounded strongly in May and June as lockdowns lifted, but slowed in July. Meanwhile, investment spending has been weak, with business confidence still below pre-pandemic levels. IHS Markit said equipment and tool makers were seeing a particularly weak rebound.
“Producers of investment goods such as plant and machinery reported the weakest order-book growth, and job losses remained among the most prevalent since the global financial crisis,” said Chris Williamson, IHS Markit’s chief business economist.
Figures released Tuesday by the European Union’s statistics agency showed that 344,000 people lost their jobs across the eurozone in July, raising the jobless rate to 7.9% from 7.7% in June. That was the largest jump since April, when strict lockdowns were in force across the currency area.
Spain’s manufacturing sector saw a decline in activity after a return to growth in July, largely reflecting the impact of a jump in new infections.
With new outbreaks still a threat, and job losses mounting, the return to pre-pandemic levels of activity looks set to be slow and bumpy.
“A slow recovery in external demand is likely to drive further small improvements in conditions for Asia’s export-orientated manufacturers,” said Alex Holmes, an economist at Capital Economics. “That said, it is still likely to be a long time before output consistently returns to precrisis levels.”
–Eun-Young Jeong contributed to this article.
Write to Paul Hannon at [email protected] and David Harrison at [email protected]
(END) Dow Jones Newswires
September 01, 2020 11:48 ET (15:48 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
