Manufacturing activity in the U.S. unexpectedly grew at a slightly faster rate in the month of August, the Institute for Supply Management revealed in a report on Wednesday.

The ISM said its manufacturing PMI inched up to 59.9 in August from 59.5 in July, with a reading above 50 indicating growth in the sector. The uptick surprised economists, who had expected the index to dip to 58.6.

The unexpected increase by the headline index came as the new orders index climbed to 66.7 in August from 64.9 in July and the production index rose to 60.0 from 58.4 in the previous month.

Meanwhile, the report showed the employment index slid to 49.0 in August from 52.9 in July, indicating a modest contraction in employment in the manufacturing sector.

The prices index also slumped to 79.4 in August from 85.7 in July, pointing to a slowdown in the pace of price growth.

While the manufacturing PMI unexpectedly edged higher, Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee noted companies and suppliers continue to struggle at unprecedented levels to meet increasing demand.

“All segments of the manufacturing economy are impacted by record-long raw-materials lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products,” Fiore said.

He added, “The new surges of COVID-19 are adding to pandemic-related issues – worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems – that continue to limit manufacturing-growth potential.

However, Fiore also noted optimistic panel sentiment remained strong, with eight positive comments for every cautious comment.

On Friday, the ISM is scheduled to release a separate report on activity in the service sector in the month of August. The services PMI is expected to drop to 61.6 in August from 64.1 in July.


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