The ISM business activity index measuring production levels advanced by 4.4-points to 64.4. Readings above 50.0 indicate expansion and so the fact that gauges covering Production and New Orders are above 60.0 signifies continued economic strength.
While the manufacturing sector accounts for only 12% of the world’s largest economy, it remains a significant barometer for the health of the American economy and, as a rule, is a good indicator of how well the rest of the world is doing
As with the earlier ADP report, the report makes for curious reading. The Production reading added a tad to 64.6 indicating still robust manufacturing activity. However, the pace of New Orders fell at the fastest pace since January
A drive to update plants and equipment is propelling gains in business investment that will probably keep American factories busy even as consumer spending shows signs of cooling. Better wage growth could broaden household purchases beyond automobiles and help sustain the pickup in manufacturing.
Analysts had the market prepped for expansion at a faster 55.2 pace before the report, which in the event showed manufacturing activity was slightly less brisk than during April, easing 1.7-points to 53.2; 0.6-points slower than the six-month average.