October's ISM Manufacturing Not Exactly on Fire

October marks the third consecutive month that the ISM manufacturing reading flirted with contraction. At 50.1 for the month, it compared to 50.2 in September and 51.1 in August. Bloomberg had a consensus estimate of 50.0 for October. Overall these readings did not point to contraction, which is what the factory sector actually has been in over the past year, but they are the lowest run for this report of the recovery.

The New Orders Index registered 52.9, an increase of 2.8 points from the reading of 50.1 in September. The Production Index registered 52.9, which was 1.1 points above the September reading of 51.8.

Backlog orders remain in deep contraction while employment, for the first time in six months, is also in contraction. The Employment Index registered 47.6, or 2.9 points below the September reading of 50.5. Backlog of orders registered 42.5, an increase of one point from the September reading of 41.5.

The Prices Index registered 39, an increase of one point from the September reading of 38, indicating lower raw materials prices for the 12th consecutive month.

The New Export Orders Index registered 47.5, up a point from September, and the Imports Index registered 47, down 3.5 points from the September reading of 50.5. Exports have been the difference this year for the factory sector, and new export orders in this report remain below 50 for the fifth straight month.

Comments from the panel reflect concern over the high price of the dollar and the continuing low price of oil, mixed with cautious optimism about steady to increasing demand in several industries.

Unlike the regional Federal Reserve reports, this report is not pointing to contraction for the factory sector, only to no change from what were already limited levels. No matter what report you pick, the factory sector isn’t exactly on fire.

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