The Markit Flash U.S. Manufacturing Purchasing Managers' Index (PMI) increased an estimated 0.4% to 53.9 for August, according to a Markit report (link opens as PDF) released today, suggesting a "moderate expansion" of the manufacturing sector.
The "flash" estimate is typically based on approximately 85% to 90% of total PMI survey responses each month and is designed to provide an advance indication of the final PMI data. An above-50 reading denotes general growth, while below 50 signals contraction. Markit is a global financial information services company.
This month's report marks the strongest manufacturing improvements in five months. Analysts were pleasantly surprised by the news, having expected a slight fall from July's final 53.7 reading to 53.5.
Digging deeper, many of the index's most important components continue to improve. New orders added on one point to hit 56.5, a seven-month high. Although today's report from the Labor Department on initial jobless claims showed a 4% week-to-week increase, employment in the latest Markit report expanded 0.2 points to register at 53.2. New export orders and output also expanded in the Markit report, but at a slower rate. Inventories generally contracted, as did backlogs of work.
"The U.S. manufacturing sector saw only modest growth of production in August, suggesting that the economy is continuing to recover in the third quarter but that the pace of expansion remains disappointingly sluggish," said Markit Chief Economist Chris Williamson in a statement today. "Hopefully the faster growth of new orders seen during August will translate into increasingly strong production gains in coming months, and also boost hiring."
Williamson also noted that this month's report might contribute to the Fed's assessment of an improving economy -- something that will play into when the Fed tapers off asset purchases. But Williamson noted that growth remains "fragile," and said the Federal Open Market Committee should ensure policy "is not tightened too fast."
The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.