Manufacturing sector contracted in September

The Purchasing Managers’ Index (PMI) fell 1.3 percentage points to 47.8% in September and was the second consecutive month that economic activity in the manufacturing sector contracted, according to the Institute for Supply Management (ISM). A reading above 50% indicates the manufacturing economy is expanding and below 50% indicates it’s contracting.

The ISM on Tuesday (Oct. 1) released the Manufacturing ISM Report on Business for September.

The new orders index rose 0.1 percentage points to 47.3% in September, from August. The production index fell 2.2 percentage points to 47.3%. The employment index fell 1.1 percentage points to 46.3%. The supplier deliveries index decreased by 0.3 percentage points to 51.1%. The inventories index declined 3 percentage points to 46.9%. The prices index rose 3.7 percentage points to 49.7%. The new export orders index fell 2.3 percentage points to 41%. The imports index rose 2.1 percentage points to 48.1%.

The overall economy grew for the 125^th consecutive month, but business confidence continues to fall as the PMI contracted at a faster rate in September, compared to the decline in August, according to the ISM. Demand declined, with the new orders index contracting at August levels, the customers’ inventories index was nearly in ‘about right’ territory and the backlog of orders index declined for the fifth consecutive month and at a faster rate. The new export orders index fell and had a negative impact on the new orders index. Consumption, which is measured by the production and employment indexes, fell as a result of lack of demand and led to a combined 3.3 percentage point decrease to the PMI. Inputs, which comprise supplier deliveries, inventories and imports, fell as inventory tightened for the fourth consecutive month. The result was a combined 3.3 percentage point decrease in the supplier deliveries and inventories indexes. The decline in imports slowed. Overall, inputs indicate supply chains are meeting demand, and companies are continuing to closely match inventories to new orders. Prices fell for the fourth consecutive month but at a slower rate.

Global trade remains the most significant issue, and this is reflected in the decline in new export orders, beginning in July, according to the ISM. Overall, sentiment is cautious with regard to short-term growth.

The following manufacturing industries reported growth in September: miscellaneous manufacturing; food, beverage and tobacco products; and chemical products.

The following 15 industries reported contraction in September: Apparel, leather and allied products; printing and related support activities; wood products; electrical equipment, appliances and components; textile mills; paper products; fabricated metal products; plastics and rubber products; petroleum and coal products; primary metals; transportation equipment; nonmetal mineral products; machinery; furniture and related products; and computer and electronic products.