According to the latest Manufacturing ISM Report On Business, economic activity in the U.S. manufacturing sector contracted in October for the 12th consecutive month following a 28-month period of growth.
The Manufacturing PMI was 46.7% in October, 2.3 percentage points lower than the 49% recorded in September. A Manufacturing PMI above 48.7% generally indicates an expansion of the overall economy, according to the report. The report was issued Nov. 1 by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management Manufacturing Business Survey Committee.
“The overall economy dropped back into contraction after one month of weak expansion preceded by nine months of contraction and a 30-month period of expansion before that,” Fiore said. “The New Orders Index remained in contraction territory at 45.5%, 3.7 percentage points lower than the figure of 49.2% recorded in September. The Production Index reading of 50.4% is a 2.1-percentage point decrease compared to September’s figure of 52.5%. The Prices Index registered 45.1%, up 1.3 percentage points compared to the reading of 43.8% in September. The Backlog of Orders Index registered 42.2%, 0.2 percentage point lower than the September reading of 42.4%. The Employment Index registered 46.8%, down 4.4 percentage points from the 51.2% reported in September.”
The Supplier Deliveries Index figure of 47.7% is 1.3 percentage points higher than the 46.4% recorded in September, Fiore said. Supplier Deliveries is the only ISM Report On Business index that is inverse — a reading of above 50% indicates slower deliveries, which is “typical as the economy improves and customer demand increases,” he added.
“The Inventories Index decreased by 2.5 percentage points to 43.3 %; the September reading was 45.8 percent,” Fiore said. “The New Export Orders Index reading of 49.4% is 2 percentage points higher than September’s figure of 47.4%. The Imports Index remained in contraction territory, registering 47.9%, 0.3 percentage point lower than the 48.2% reported in September.”
Of the six biggest manufacturing industries, only one — Food, Beverage & Tobacco Products — registered growth in October, according to the report.
The 13 industries reporting contraction in October were: Printing & Related Support Activities; Textile Mills; Electrical Equipment, Appliances & Components; Machinery; Fabricated Metal Products; Wood Products; Computer & Electronic Products; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; Primary Metals; Chemical Products; and Transportation Equipment.
Manufacturing at a Glance — October 2023 (Source: Manufacturing ISM Report On Business)
|Index||Series Index Oct||Series Index Sep||Percentage Point Change||Direction||Rate of Change||Trend* (Months)|
|Customers’ Inventories||48.6||47.1||+1.5||Too Low||Slower||5|
|Backlog of Orders||42.2||42.4||-0.2||Contracting||Faster||13|
|New Export Orders||49.4||47.4||+2.0||Contracting||Slower||5|
|OVERALL ECONOMY||Contracting||From Growing||1|
The Past 12 Months (Source: Manufacturing ISM Report On Business)
Here is a sampling of ISM manufacturing PMI survey respondent commentary for October:
- “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.” [Computer & Electronic Products]
- “Economy absolutely slowing down. Less optimism regarding the first quarter of 2024.” [Chemical Products]
- “Backlog is starting to dip a bit. We’re hearing of cutbacks in 2024 ordering, but it’s still very strong compared to historical averages.” [Transportation Equipment]
- “Markets appear to have slightly slowed. Certain commodities remain high.” [Food, Beverage & Tobacco Products]
- “Seeing a slowdown on bookings, and our backlog is down to five days from 15 weeks earlier this year.” [Machinery]
- “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.” [Fabricated Metal Products]
- “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.” [Furniture & Related Products]
- “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.” [Nonmetallic Mineral Products]
- “Demand for raw materials/chemicals appears to be stable heading into the fourth quarter.” [Petroleum & Coal Products]
- “Orders continue to increase in some sectors. Construction industry-related products/orders are slowing down.” [Plastics & Rubber Products]
- “Despite the ongoing United Auto Workers (UAW) strike, there’s a firmness and pickup in orders for the rest of the fourth quarter.” [Primary Metals]