U.S. manufacturing activity hits highest level since March 2018

A gauge of U.S. manufacturing activity jumped to its highest level in nearly a year and a half last month as manufacturing firms said orders increased despite a resurgence in new coronavirus infections.

Yes, but: Job losses continue to mount in the industry and economists note that manufacturing surveys like this one from the Institute for Supply Management largely measure how much sentiment has increased rather than an actual tracking of revenue or new orders.

• “After the scale of shutdowns we really should be seeing a large proportion of firms saying they are experiencing rising output,” James Knightley, chief international economist at ING, told Reuters.
• “Jobs continue to be lost in the sector. With COVID-19 cases picking up, businesses are likely to remain cautious.”

Of note: Deutsche Bank’s chief international strategist Alan Ruskin points out in a note that recent manufacturing data "are apt to give a misleading perspective on overall activity, since select sectors impacted by social distancing have seen an unprecedented collapse in levels of activity that will vastly exceed the small improvements now seen in manufacturing."

• "Importantly, because of the way diffusion indices are constructed around questions of whether things are improving, getting worse or the same, it is also expected that steady PMI near 50 are going to be associated with a much lower level of manufacturing output than it did before the virus-led downswing."