Economic activity in the manufacturing sector expanded in September for the ninth consecutive month, according to the latest ISM Manufacturing PMI Report.
The report was issued by Susan Spence, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee: “The Manufacturing PMI registered 54.5% in September, 0.1 percentage point below the August figure of 54.6%. The overall economy continued in expansion for the 23rd month in a row. (A Manufacturing PMI above 47.5%, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index expanded for the ninth consecutive month after four straight readings in contraction, registering 55.3%, up 1.6 percentage points compared to August’s figure of 53.7%. The September reading of the Production Index (56.7%) is 1.6 percentage points lower than the 58.3% recorded in August. The Prices Index remained in expansion (or ‘increasing’ territory), registering 77.9%, a notable increase of 6.8 percentage points compared to August’s reading of 71.1%. The Backlog of Orders Index registered 56.4%, up 4.6 percentage points compared to the 51.8% recorded in August. The Employment Index reading of 52.7% is up 1.5 percentage points from August’s figure of 51.2%.”
Spence continued, “The Supplier Deliveries Index indicated slowing performance for the 10th month in a row after one month in ‘faster’ territory. The reading of 59% is down 0.3 percentage point from its August reading of 59.3%. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 48.6%, down 2 percentage points compared to August’s reading of 50.6%. The Customers’ Inventories Index reading of 41.6% is 1.2 percentage points lower compared to the 42.8% recorded in August. The New Export Orders Index lost 2.3 percentage points in September for a reading of 50.9% versus 53.2% in August. The Imports Index registered 51%, a decrease of 1.5 percentage points compared to August’s reading of 52.5%.”
Spence added, “In September, U.S. manufacturing activity remained in expansion territory. Of the five subindexes that make up the PMI, only New Orders and Employment grew faster than the previous month. In September, 40% of the comments were positive and 60% negative, with a 1-to-1.6 ratio of positive to negative sentiment. Among negative comments, pricing volatility was mentioned in 46%, tariffs 34%, the Iran war 30% and increasing lead times 21%; most comments mentioned multiple factors. In September, three of four demand indicators (the New Orders, Backlog of Orders and New Export Orders indexes) remained in expansion, and the Customers’ Inventories Index remained in ‘too low’ territory, contracting at a faster rate. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production.”
Spence commented, “Regarding output, the Production Index expanded for the 11th month in a row, with the positive-to-negative comment ratio dropping again in September (1.6 positive comments for every negative one, compared to a 2.2-to-1 ratio in August and 3.3-to-1 in July). The Employment Index remained in expansion and gained 1.5 percentage points. The positive-to-negative comments ratio on Employment was 1.5-to-1 in September. Finally, inputs (defined as supplier deliveries, inventories, prices and imports) were mixed, with the Supplier Deliveries Index decreasing 0.3 percentage point, the Inventories Index declining another 2 percentage points and returning to contraction, and the Prices Index increasing 6.8 percentage points, returning to its level at the start of the Iran War. The Imports Index lost 1.5 percentage points, to 51% versus 52.5% in August.”
Spence concluded, “Looking at the manufacturing economy, 2% of the sector’s gross domestic product (GDP) contracted in September, compared to 22% in August, and 2% of manufacturing GDP was in strong contraction (defined as a composite PMI of 45% or lower), the same as in August. The share of sector GDP with a PMI at or below 45% is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, five (Computer and Electronic Products, Food, Beverage and Tobacco Products, Transportation Equipment, Machinery; and Chemical Products) expanded in September.”
The 12 manufacturing industries reporting growth in September — listed in order — are: electrical equipment, appliances and components; nonmetallic mineral products; primary metals; plastics and rubber products; computer and electronic products; fabricated metal products; furniture and related products; food, beverage and tobacco products; transportation equipment; machinery; miscellaneous manufacturing; and chemical products. The two industries reporting a contraction in September are: printing and related support activities; and textile mills.
