Economic activity in the manufacturing sector fell in October for the 12th consecutive month amid soft demand and excess capacity, according to the Institute for Supply Management (ISM).
On Wednesday (Nov. 1), the ISM released the Manufacturing ISM Report on Business for October that shows the purchasing managers’ index (PMI) fell 2.3 percentage points to 46.7% in October from September. A reading below 50% indicates manufacturing activity is contracting.
According to the October report, new orders and backlogs decreased. Employment declined. Production expanded. Supplier deliveries were faster. Raw materials inventories fell. Customers’ inventories were “about right…(but) not accommodative for future production.” Prices fell. Imports and exports declined.
“The U.S. manufacturing sector continued to contract at a faster rate in October, dropping 2.3 percentage points to 46.7%, compared to September’s reading of 49%,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. “Companies are still managing outputs appropriately as order softness continues.
Fiore noted that companies maintained stable month-over-month production levels and took more immediate action to reduce staffing, primarily through layoffs. Suppliers continue to have capacity.
Two manufacturing industries reported growth in October: Food, beverage and tobacco products, and plastics and rubber products.
Following are comments from respondents, many of whom are reporting mixed demand:
In the computer and electronic products industry, a respondent said “markets remain tough, and we have focused more resources on sales and marketing to drive greater sales and new market penetration with our devices. Lots of leadership focus on what we can do in the near term that will also support long-term company goals.”
A respondent in the machinery industry said its bookings are falling, and its backlog has declined to five days from 15 weeks earlier this year.
“A slow fourth quarter, and we’re clearly in a mild industry recession,” said a respondent in the fabricated metal products industry. “However, demand is down less than 5%, and customer confidence of a recovery in the second half of 2024 is solid. Supplier deliveries are stable, and suppliers are seeking more work. But they’re not yet willing to adjust prices to compete for it.”
A respondent in the chemical products industry said the “economy (is) absolutely slowing down. Less optimism regarding the first quarter of 2024.”
In the transportation equipment industry, a respondent said the backlog is starting to decrease. “We’re hearing of cutbacks in 2024 ordering, but it’s still very strong compared to historical averages.”
A respondent in the food, beverage and tobacco products industry said, “markets appear to have slightly slowed. Certain commodities remain high.”
In the plastics and rubber products industry, a respondent said, “orders continue to increase in some sectors. Construction industry-related products/orders are slowing down.”
A respondent in the furniture and related products industry said, “business is decent – not great, but steady and solid. We are meeting our sales and margin goals, but it’s definitely hard to guess the future.”
In the petroleum and coal products industry, a respondent said, “demand for raw materials/chemicals appears to be stable heading into the fourth quarter.”
A respondent in the nonmetallic mineral products industry said, “commercial constructions continue to remain ahead of 2022. We have some concern over 2024 regarding inflation, as well as gas and oil pricing potentially slowing down building.”
A primary metals industry respondent said, “despite the ongoing United Auto Workers strike, there’s a firmness and pickup in orders for the rest of the fourth quarter.”