Economic activity in the manufacturing sector contracted in October for the seventh consecutive month and the 23rd time in the last 24 months, say the nation’s supply executives in the latest Manufacturing ISM Report On Business. The report was issued by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.
“The Manufacturing PMI registered 46.5 percent in October, 0.7 percentage point lower compared to the 47.2 percent 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 percent, over a period of time, generally indicates an expansion of the overall economy.)
“The New Orders Index remained in contraction territory, registering 47.1 percent, 1 percentage point higher than the 46.1 percent recorded in September. The October reading of the Production Index (46.2 percent) is 3.6 percentage points lower than September’s figure of 49.8 percent. The Prices Index returned to expansion territory, registering 54.8 percent, up 6.5 percentage points compared to the reading of 48.3 percent in September. The Backlog of Orders Index registered 42.3 percent, down 1.8 percentage points compared to the 44.1 percent recorded in September. The Employment Index registered 44.4 percent, up 0.5 percentage point from September’s figure of 43.9 percent.
“The Supplier Deliveries Index indicated slowing deliveries, registering 52 percent, 0.2 percentage point lower than the 52.2 percent recorded in September. (Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 42.6 percent, down 1.3 percentage points compared to September’s reading of 43.9 percent.
“The New Export Orders Index reading of 45.5 percent is 0.2 percentage point higher than the 45.3 percent registered in September. The Imports Index remained in contraction territory in October, registering 48.3 percent, the same reading as reported in September.”
Fiore continues, “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 New Orders Index remaining in contraction territory, New Export Orders Index contracting moderately, Backlog of Orders Index dropping further into strong contraction territory, and 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. Panelists cited continuing efforts by their companies to right-size workforces to levels consistent with forecasted demand.
“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 percent in September. The share of manufacturing sector GDP registering a composite PMI calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 46 percent in October, a 5-percentage point increase compared to the 41 percent reported in September. Only two of the six largest manufacturing industries — Food, Beverage & Tobacco Products; and Computer & Electronic Products — expanded in October, compared to one in September,” says Fiore.
The five manufacturing industries reporting growth in October are: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Computer & Electronic Products; and Miscellaneous Manufacturing. The 11 industries reporting contraction in October are: Textile Mills; Printing & Related Support Activities; Transportation Equipment; Chemical Products; Electrical Equipment, Appliances & Components; Machinery; Primary Metals; Nonmetallic Mineral Products; Plastics & Rubber Products; Fabricated Metal Products; and Paper Products.
