Factory growth picks up its pace

But trade issues worry some firms

WASHINGTON — U.S. factories grew at a faster pace in August, the Institute for Supply Management said Tuesday, as American industry continues to show robust health.

The Institute for Supply Management, a trade group of purchasing managers, said its manufacturing index jumped last month to 61.3 from 58.1 in July. Anything over 50 signals growth, and U.S. manufacturing is on a 24-month winning streak. Sixteen of 18 manufacturing industries expanded in August, led by makers of electronic equipment, clothing, textiles and paper products.

New orders, production and inventories all grew faster in August. And factories stepped up hiring. The gauge of employment climbed from 56.5 to a sixmonth high of 58.5.

Manufacturers are coping with labor shortages and supply disruptions stemming from ongoing trade disputes with China, Canada, Mexico and Europe. Among other things, U.S. tariffs on imported steel and aluminum are raising costs for many man-

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Nearly half of the companies that responded to the survey expressed concern over trade and tariff uncertainty, said Timothy Fiore, chairman of the group’s manufacturing survey committee.

Companies are doing their annual planning now, Fiore noted, and if managers conclude that tariffs are making the materials they import too costly, “they’re going to look for other options,” he said.

“Uncertainty is the biggest enemy of business,” said Fiore, who is chief procurement officer at the transportation company Ryder System Inc.

Factories so far have been able to shrug off a substantial rise in the value of the dollar against major currencies since mid-April. A stronger dollar makes U.S. products more expensive in foreign markets.

The overall economic backdrop, however, remains healthy. The U.S. economy, fueled in part by tax cuts enacted in December, expanded in the second quarter at a 4.1 percent annual pace, the fastest since 2014.

The report shows that factories remained solid in the third quarter, signaling that the nearly decade-old expansion will hold up well in the second half of 2018. The rise in the employment gauge suggests that manufacturers might record another month of strong payroll gains in Labor Department figures due Friday.

The institute’s measure of export orders fell to a 10-month low of 55.2 from 55.3, while the index of imports slipped to 53.9, the lowest since September 2017, from 54.7.

The gauges of exports and imports also may indicate that months of intensifying tensions are taking a toll on trade. Negotiations with Canada on changes to the North American Free Trade Agreement ended without a deal by Friday’s deadline, though talks are scheduled to resume today.