Economic activity in the manufacturing sector grew slightly in October, according to supply executives in an Institute for Supply Management Report On Business.
Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, observed that the Purchasing Managers’ Index numbers suggest that the United States economy as the year winds down continues growing. However, the index figure slipped from September and is just over the 50% mark that divides growth from contraction.
“The October Manufacturing PMI registered 50.2%, 0.7 percentage point lower than the 50.9% recorded in September,” Fiore said. “This figure indicates expansion in the overall economy for the 29th month in a row after contraction in April and May 2020. The Manufacturing PMI figure is the lowest since May 2020, when it registered 43.5%. The New Orders Index remained in contraction territory at 49.2%, 2.1 percentage points higher than the 47.1% recorded in September. The Production Index reading of 52.3% is a 1.7-percentage point increase compared to September’s figure of 50.6%. The Prices Index registered 46.6%, down 5.1 percentage points compared to the September figure of 51.7%. This is the index’s lowest reading since May 2020: 40.8%. The Backlog of Orders Index registered 45.3%, 5.6 percentage points lower than the September reading of 50.9%. After one month of contraction, the Employment Index was unchanged at 50%, 1.3 percentage points higher than the 48.7% recorded in September.
“The Supplier Deliveries Index reading of 46.8% is 5.6 percentage points lower than the September figure of 52.4%. This reading, the index’s lowest since March 2009, 43.2%, ended a streak of 79 months in ‘slowing’ territory. The Inventories Index registered 52.5%, three percentage points lower than the September reading of 55.5%. The New Export Orders Index reading of 46.5% is down 1.3 percentage points compared to September’s figure of 47.8%. This is the index’s lowest figure since May 2020, when it registered 39.5%. The Imports Index remained in expansion territory at 50.8%, 1.8 percentage points below the September reading of 52.6%.”
Fiore noted that ISM’s supply chain executive panelists reported softening new order rates over the previous five months.
“The October index reading reflects companies’ preparing for potential future lower demand,” he said. “In the meantime, demand eased, with the New Orders Index remaining in contraction territory, New Export Orders Index below 50% for a third consecutive month and at a faster rate of contraction, Customers’ Inventories Index remaining at a low level, with the same reading as in September and Backlog of Orders Index slipping into contraction. Output/Consumption, measured by the Production and Employment indexes, improved month over month, with a combined positive three percentage point impact on the Manufacturing PMI calculation. The Employment Index shifted from contraction to a reading of 50%, and the Production Index increased by 1.7 percentage points, staying in modest growth territory.”
Companies represented on the Business Survey Committee panel are managing head counts “through hiring freezes and attrition to lower levels, with medium- and long-term demand still uncertain. Inputs, defined as supplier deliveries, inventories, prices and imports, mostly accommodated growth,” Fiori added. “The Supplier Deliveries Index indicated faster deliveries and the Inventories Index dropped 3 percentage points as panelists’ companies continued to manage the total supply chain inventory. The Prices Index decreased for a seventh straight month and fell into contraction territory, which should encourage buyers.”
Eight manufacturing industries reported growth in October month over month, according to the ISM report, : Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Machinery; Petroleum & Coal Products; Transportation Equipment; Miscellaneous Manufacturing; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. Ten industries reported contraction in the month compared to September: Furniture & Related Products; Wood Products; Paper Products; Textile Mills; Printing & Related Support Activities; Fabricated Metal Products; Chemical Products; Primary Metals; Computer & Electronic Products; and Food, Beverage & Tobacco Products.
