Economic activity in the manufacturing sector contracted in October for the seventh consecutive month and the 23rd time in the last 24 months, according to the latest Manufacturing Report On Business by the Institute for Supply Management (ISM). The report was issued by Timothy R. Fiore chair of the ISM manufacturing business survey committee.
“The manufacturing PMI registered 46.5% in October, 0.7 percentage points lower compared to the 47.2% recorded in September. This is the lowest manufacturing PMI reading in 2024. The overall economy continued in expansion for the 54th month after one month of contraction in April 2020. (A manufacturing PMI above 42.5%, over a period of time, generally indicates an expansion of the overall economy.),” Fiore said. “The new orders index remained in contraction territory, registering 47.1%, one percentage point higher than the 46.1% recorded in September. The October reading of the production index (46.2%) is 3.6 percentage points lower than September’s figure of 49.8%. The prices index returned to expansion (or ‘increasing’) territory, registering 54.8%, up 6.5 percentage points compared to the reading of 48.3% in September. The backlog of orders index registered 42.3%, down 1.8 percentage points compared to the 44.1% recorded in September. The employment index registered 44.4%, up 0.5 percentage point from September’s figure of 43.9%.”
“The supplier deliveries index indicated slowing deliveries, registering 52%, 0.2 percentage point lower than the 52.2% recorded in September. (Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The inventories index registered 42.6%, down 1.3 percentage points compared to September’s reading of 43.9%,” Fiore said. “The new export orders index reading of 45.5% is 0.2 percentage point higher than the 45.3% registered in September. The imports index remained in contraction territory in October, registering 48.3%, the same reading as reported in September.”
“U.S. manufacturing activity contracted again in October, and at a faster 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 moderately, (3) backlog of orders index dropping further into strong contraction territory, and (4) customers’ inventories index indicating customers’ inventories were ‘too low.’ Output (measured by the Production and Employment indexes) continued in contraction: employment shrunk, but at a slower rate, while production moved further into contraction,” Fiore said. “Panelists cited continuing efforts by their companies to right-size workforces to levels consistent with forecasted 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 continuing to show marginal difficulty in meeting customer needs. Demand remains subdued, as companies continue to show an unwillingness to invest in capital and inventory due to concerns (for example, inflation resurgence) about federal monetary policy direction in light of the fiscal policies proposed by both major parties. Production execution eased in October, consistent with demand sluggishness. Suppliers continue to have capacity, with lead times improving and some shortages reappearing. Sixty-three percent of manufacturing gross domestic product (GDP) contracted in October, down from 77% in September. The share of manufacturing sector GDP registering a composite PMI calculation at or below 45% (a good barometer of overall manufacturing weakness) was 46% in October, a five-percentage point increase compared to the 41% reported in September. Only two of the six largest manufacturing industries — food, beverage and tobacco products; and computer and electronic products — expanded in October, compared to one in September.”
The five manufacturing industries reporting growth in October are:
- Apparel, leather and allied products
- Food, beverage and tobacco products
- Petroleum and coal products
- Computer and electronic products
- Miscellaneous manufacturing
The 11 industries reporting contraction in October — in the following order — are:
- Textile mills
- Printing and related support activities
- Transportation equipment
- Chemical products
- Electrical equipment, appliances and components
- Machinery
- Primary metals
- Nonmetallic mineral products
- Plastics and rubber products
- Fabricated metal products
- Paper products
