Implications: The ISM manufacturing index boomed in August, hitting the highest level in more than six years as the manufacturing sector showed strength across all major measures.  Growth continues to remain broad-based, with fourteen of eighteen industries reporting growth, while just three reported decline.  The two most forward looking indices - new orders and production – both continue to shine with readings above 60, despite a very minor slowdown in the pace of growth in new orders.  To put these numbers in perspective, the average reading for the new orders index over the past twenty years is 54.9, while production averaged 55.2 over the same period.  Given healthy growth in orders, expect production activity to also remain strong in the coming months, although some measures will show a temporary downdraft due to Hurricane Harvey.  And with the consistent strength in readings from the ISM report, we expect orders of durable goods to also show growth over the coming months, though that data is more volatile on a month-to-month basis.  On the jobs front, the employment index jumped to 59.9 in August, also hitting a six year high. This is in line with the August payroll data out earlier this morning that showed 36,000 manufacturing jobs added in August. Since January, manufacturing jobs are up 125,000, compared to a loss of 45,000 during the same months in 2016.  But it's important to remember that manufacturing remains a small portion of total employment.  On the inflation front, the prices paid index was unchanged at 62.0 in August, with fifteen commodities up in price while just one showed decline.  Prices continue to rise at a modest pace, and these rising prices at the manufacturing stage of production should flow through to consumer price inflation over the coming months, keeping the Fed on pace for normalization of the balance sheet and one more rate hike to finish out 2017.  Construction data, also released this morning, showed spending declined 0.6% in July.  A slowdown in spending on commercial, education, and health care related structures more than offset a rise in home building.

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