The US Purchasing Managers Index (PMI) for Octber was released today by the Institute for Supply Management (ISM), and came at a level of 46.7 in October, 2.3 percentage points lower than the 49.0 recorded in September. and also below the key 50 mark that separates US manufacturing expansion from contraction for the 12th straight month.
Before that the US saw a 28-month period of manufacturing growth after May 2020, not long after the start of the pandemic earlier that year.
The PMI tracks closely but not exactly with the overall US economy. The October PMI showed the economy dropped back into contraction after one month of weak expansion preceded by nine months of contraction.
A Manufacturing PMI above 48.7, over a period of time, generally indicates an expansion of the overall economy.
A similar story with the New Order Index, which remained in contraction territory with a score 45.5, 3.7 percentage points lower than the figure of 49.2 recorded in September, in a bad sign for future US manufacturing actvity.
Other numbers from ISM for the month were mostly down or below the 50 mark.
One exception was the Production Index, with a reading of 50.4 that is again above 50 but represents is a 2.1-percentage point decrease compared to September’s figure of 52.5.
The Prices Index was at 45.1, up 1.3 percentage points compared to the reading of 43.8 in September.. That means companies saw a decrease in the cost of components, materials and other inputs, but at a slower rate last month. This index (below 50 = falling prices) was not that many months ago above 80, as inflation took off.
In more economic bad news, the Backlog of Orders Index registered a low 42.2, 0.2 percentage point lower than the September reading of 42.4, meaning the order book of most companies is shrinking, with the level still well below the 50 mark.
The Supplier Deliveries Index figure of 47.7 is 1.3 percentage points higher than the 46.4 recorded in September. That means supplier lead times are shrinking. Supplier Deliveries is the only ISM index that is inversed; a reading of above 50 indicates slower deliveries, which is typical as the economy improves and customer demand increases – or the reverse.
The Inventories Index decreased by 2.5 percentage points to 43.3, compared with the September reading was 45.8, indicating inventory levels at companies are decreasing.
“The US manufacturing sector continued to contract and at a faster rate in October, dropping 2.3 percentage points to 46.7, compared to September’s reading of 49. Companies are still managing outputs appropriately as order softness continues,"
commented Timothy Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee.
(See More Below)
|
CATEGORY SPONSOR: SOFTEON |
|
|
| |
| |
|
|
As always, the ISM report provides a graphic of the full PMI scores the last 12 months, which as can be seen indicates the measure has below the key 50 mark since November 2022, and it is now averaging just 47.4 over the past year.
US PMI Last 12 Months
Source: ISM
Just two of the 15 industry US sectors tracked by the PMI reported growth in September. Those were: Food, Beverage & Tobacco Products; and Plastics & Rubber Products.
As always, there were some interesting comments from PMI survey respondents.
A respondent in the chemical sector commented that "Economy absolutely slowing down. Less optimism regarding the first quarter of 2024.”
Another from the fabricated metals sector stated that “A slow fourth quarter, and we’re clearly in a mild industry recession. However, demand is down less than 5 percent, 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."
Finally, a manager in machinery sector noted that “Seeing a slowdown on bookings, and our backlog is down to five days from 15 weeks earlier this year.”
Any reaction to this latest PMI data for October? Let us know your thoughts at the Feedback section below.
|
