Economic activity in the U.S. manufacturing sector expanded in October, the nation’s supply executives said in the latest Manufacturing “Report On Business” from the Institute for Supply Management (ISM).
“The October Manufacturing PMI (Purchasing Managers Index) registered 50.2 percent, 0.7 percentage point lower than the 50.9 percent recorded in September,” Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, said.
A Manufacturing PMI above 48.7 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the October Manufacturing PMI indicates the overall economy grew in October for the 29th consecutive month following contraction in April and May 2020.
However, the Manufacturing PMI figure is the lowest since May 2020, when it registered 43.5 percent, Fiore pointed out.
“The U.S. manufacturing sector continues to expand, but at the lowest rate since the coronavirus pandemic recovery began,” Fiore said. “With panelists reporting softening new order rates over the previous five months, the October index reading reflects companies’ preparing for potential future lower demand. Panelists’ companies continue to carefully manage hiring, month-over-month supplier delivery performance was the best since March 2009, and the Prices Index indicated decreasing prices for the first time since May 2020.”
Eight manufacturing industries reported growth in October, led by apparel, leather and allied products, while 10 industries reported contraction in October compared to September, topped by furniture and related products and including textile mills.
Indicating raw materials prices decreased for the first time in 28 months, the ISM Prices Index registered 46.6 percent in October, 5.1 percent lower than September. This is the lowest reading since May 2020.
Over the past seven months, the index has decreased 40.5 percentage points, including a combined 26 percent plunge in July and August. A Prices Index above 52.6 percent is usually in line with an increase in the BLS Producer Price Index for Intermediate Materials.
“The slowing in price increases continues to be driven by three factors–a relaxation in the energy markets, softening in the copper, steel, aluminum and corrugate markets, and sluggishness in chemical and plastics demand,” Fiore said. “Notably, 80.3 percent of respondents reported paying the same or lower prices in October, compared to 68.6 percent in September. The long-awaited price declines should cause buyers and sellers to return to the table and refill order books as backlogs contract.”
In October, the 10 industries reporting paying less for raw materials included apparel, leather and allied products, and furniture and related products.
ISM’s New Orders Index contracted for the second straight month in October, registering 49.2 percent, an increase of 2.1 percent compared to the 47.1 percent reported in September. A New Orders Index above 52.9 percent is usually in line with an increase in the Census Bureau’s series on manufacturing orders.
Of the 18 manufacturing industries, three reported growth in new orders in the month, led by apparel, leather and allied products, while 12 industries reported a decline in new orders, including furniture and related products and textile mills. The Production Index rose 1.7 percent to 52.3 percent in October. An index above 52.4 percent is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
The eight industries reporting a decrease in production in October were topped by textile mills and furniture and related products.
ISM’s Employment Index registered 50 percent in October, 1.3 percent higher than the September reading. An Employment Index above 50.5 percent is usually consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
Of 18 manufacturing industries, nine reported employment growth in October, led by apparel, leather and allied products. The five industries reporting a decrease in employment in October were topped by furniture and related products.
The delivery performance of suppliers to manufacturing organizations got faster in October, as the Supplier Deliveries Index registered 46.8 percent, 5.6 percent lower than the 52.4 percent reported in September and the first time in “faster” territory since February 2016.
Fiore noted that a reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries. Four of 18 manufacturing industries reported slower supplier deliveries in October, topped by apparel, leather and allied products and including textile mills, while furniture and related products led the nine industries reporting faster supplier deliveries in October as compared to September.
The Inventories Index fell 3 percent to 52.5 percent in October. An Inventories Index greater than 44.4 percent is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories. Of 18 manufacturing industries, the nine reporting higher inventories in October included furniture and related products.
ISM’s Customers’ Inventories Index registered 41.6 percent in October, the same figure reported for September, indicating that customers’ inventory levels were considered too low, which Fiore said was “a positive for future production growth.”
ISM’s Backlog of Orders Index declined 5.6 percent to 45.3 percent in October, indicating order backlogs contracted after a 27-month period of piling up.
Three industries reported growth in order backlogs in October, led by apparel, leather and allied products, while 12 industries reported lower backlogs in October, topped by textile mills an furniture and related products.
ISM’s New Export Orders Index registered 46.5 percent in October, 1.3 percent below September. Fiore noted that the New Export Orders Index contracted for the third consecutive month after 25 straight months in expansion territory. He said weakness in European economies and China’s economic sluggishness continued to constrain new export orders expansion and negatively impact new order rates.”
The 10 industries reporting a decrease in new export orders in October included textile mills, and furniture and related products.
Meanwhile, ISM’s Imports Index dipped 1.8 percent to 50.8 percent in October. Furniture and related products were among the five industries reporting lower volumes of imports in October. Six industries, including apparel, leather and allied products and textile mills reported no change in imports for the month.