MNI INTERVIEW: US Factories in 'Clear V' Rebound- ISM Chief

U.S. factories are in a V-shaped recovery after their first full month of major re-opening in August, and the issues now are filling orders and re-hiring workers amid fears of a second wave of Covid, Institute for Supply Management manufacturing chair Tim Fiore told MNI Tuesday.

The Manufacturing PMI for rose 1.8 points to 56 from 54.2 in July, the strongest reading since November 2018, and up from a record low 41.5 in April. The 50 mark divides between signs of expansion and contraction.

"You can see a clear 'V,'" shaped recovery, Fiore said. That momentum has come even without companies being allowed to move to the fourth and final stage of re-opening, he said.

"Everything is operating as best it can at present and although we haven't gotten to that stage four level post-Covid it is going to be difficult to get there in the short-term anyway," Fiore said.

"It was the purest 30-day period of this is how we are going to operate," Fiore said. "Even in July there were some questionable things and questions as to whether everybody was up or not. There was a lot of experimenting going on and factories were exploring new layouts in June and July and by August they were all set."

Strength Into Year-End

Further evidence of more good months ahead: the new orders sub-index jumped 6.1 to 67.6 in August, the highest since 2004.

That kind of strength "is probably where we will be in September, October and November, absent some external influence that comes in and disrupts that," the ISM chief said. Those wild cards include potential disruptions from schools re-opening or any political risks around this year's elections, he said.

Congress should look at extending economic support and make sure the money doesn't keep people from returning to good jobs, he said.

"We need that stimulus. We are not out of the woods yet," Fiore said.

Meeting Demand

If the overall economy keeps going, factories can keep plugging away at rebuilding production networks across different locations, he said.

"The biggest constraint to September and October growth is the suppliers' ability to meet the demand of their customers," he said.

Matching laid-off workers back to jobs quickly would help, and Fiore said that reducing extra jobless benefits by half to USD300 per week should help lure back staff in the next few weeks. For now, the latest report showed some signs of permanent layoffs, with the employment index growing 2.1 points but remaining in contraction territory at 46.4.

"There will be permanent job loss," Fiore said, pointing to the oil and gas sector, truck drivers, and commercial real estate.