The US manufacturing sector continues to struggle, with October marking the seventh consecutive month of contraction. The latest Manufacturing ISM Report on Business, released today, reveals a concerning decline in the purchasing managers’ index (PMI), dropping to 46.5% from September’s 47.2%. This marks the lowest reading of the year, indicating a deepening downturn in the sector.
Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, attributes the ongoing contraction to a combination of factors, including weak demand and production drops. “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,” he explained.
The report reveals a sharp fall in production during October, with the production index registering 46.2%, a significant drop from September’s 49.8%. While employment remains in contraction territory, it showed slight improvement, reaching 44.4%.
The report also highlights worrying signs in the supply chain, with the Backlog of Orders Index slipping to 42.3% and inventories continuing their descent at 42.6%. Demand indicators remain sluggish, with the New Orders Index at 47.1%, and exports stuck in contraction territory at 45.5%.
Despite the overall negative trends, Fiore points to signs of expansion in certain sectors. Notably, food, beverage, and tobacco products, as well as computer and electronic products, showed resilience. A handful of industries, including Apparel and Petroleum Products, even reported growth. However, sectors like textile mills, transportation equipment, and Chemical Products continue to struggle, contributing to a bleak outlook for the overall manufacturing sector, with manufacturing GDP contracting across 63% of the industry.
The report emphasizes that inflation concerns and uncertainties surrounding federal monetary policy are key reasons for companies’ cautiousness in capital investments, further contributing to the current economic slowdown. The manufacturing sector, a crucial driver of economic growth, faces significant challenges, and its continued contraction raises concerns about the overall health of the US economy.
