ISM Manufacturing Data Sees Near-Decade Low for September

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Two fresh readings have been seen for the U.S. manufacturing sector. One rose further into expansion and the more prominent index contracted further.

The Markit PMI Manufacturing Index rose to 51.1 for September, up from the prior reading of 50.3 in August. Econoday had a consensus estimate of 51.0. While this was above consensus and above the breakeven line for growth or contraction, it points to a cautious outlook with tempered hiring and business demand trends.

A more widely followed report is from the Institute for Supply Management, and the ISM’s Manufacturing Index fell to 47.8% in September. Econoday had a consensus estimate of 50.0%,l and the prior reading for August was 49.1%. This is shown to be a multiyear low, with weak new orders.

The general commentary is rather grim on the manufacturing front. Consumption contracted at faster rates with a lack of demand, and this accounted for a combined 3.3-percentage point decrease to the overall PMI figure. The ISM explanations showed that demand and new orders contracted, while inventories were more or less in the right area. Order backlog contracted for the fifth straight month, and a strong contraction in new export orders was a negative impact on total new orders. Inputs were again lower in September while the imports contraction slowed, and bad news for the inflation front: prices decreased for the fourth consecutive month, but at a slower rate.

The individual component breakdown on the ISM data is as follows:

  • New Orders Index 47.3%, an increase of 0.1 percentage point from August.
  • Production Index 47.3%, a 2.2-percentage point decrease from August.
  • Employment Index 46.3%, a decrease of 1.1 percentage points from August.
  • Supplier Deliveries Index 51.1%, a 0.3-percentage point drop from August.
  • Inventories Index 46.9%, a decrease of 3 percentage points from August.
  • Prices Index 49.7%, a 3.7-percentage point gain from August.
  • New Export Orders Index 41%, a 2.3-percentage point decrease from August.
  • Imports Index 48.1%, a 2.1-percentage point gain from August.

Of the 18 manufacturing industries covered by ISM, only three of the 18 reported growth in September: Miscellaneous Manufacturing, Food, Beverage & Tobacco Products, and Chemical Products.

While the ISM data showed that the manufacturing data contracted in September, the United States is largely a post-manufacturing (a services and resources) economy. ISM did say that the overall economy posted growth for the 125th consecutive month.

The Dow Jones industrials, S&P 500 and Nasdaq Composite had all been up ahead of the reports, and the Nasdaq was still up almost 0.1% afterward. That said, the Dow was down 72 points at 26,844 and the S&P 500 was down 554 at 2,971.20.

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