The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) stays at 47.2 in September but remains in contraction territory for a sixth straight month. The index has now contracted for 22 of the past 23 months. The latest reading was worse than the forecast of 47.6.
Here is an excerpt from the latest report:
Fiore continues, “U.S. manufacturing activity contracted again in September, and at the same rate compared to last month. Demand continues to be weak, output declined, and inputs stayed accommodative. Demand slowing was reflected by the (1) New Orders Index remaining in contraction territory, (2) New Export Orders Index contracting at a faster rate, (3) Backlog of Orders Index staying in strong contraction territory, and (4) Customers’ Inventories Index indicating customers’ inventories were “about right.” (For more, see the Customers’ Inventories Index summary section.) Output (measured by the Production and Employment indexes) continued in contraction with mixed results: Employment shrunk at a faster rate while production approached expansion, with levels on par compared to August. Panelists cited continuing efforts by their companies to right-size workforces to levels consistent with projected demand. Inputs — defined as supplier deliveries, inventories, prices and imports — generally continued to accommodate future demand growth, with inventories returning to low levels and suppliers showing some difficulty in meeting customer needs.
“Demand remains subdued, as companies showed an unwillingness to invest in capital and inventory due to federal monetary policy — which the U.S. Federal Reserve addressed by the time of this report — and election uncertainty. Production execution stabilized in September. Suppliers continue to have capacity, with lead times improving and shortages reappearing. Seventy-seven percent of manufacturing gross domestic product (GDP) contracted in September, up from 65 percent in August. The share of manufacturing sector GDP registering a composite PMI® calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 41 percent in September, an 8-percentage point increase compared to the 33 percent reported in August. Only one of the six largest manufacturing industries — Food, Beverage & Tobacco Products — expanded in September, compared to two in August,” says Fiore.
