Economic activity in the manufacturing sector expanded in October for the 10th consecutive month, according to the nation’s supply executives in 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 55.5% in October, 1 percentage point above the September figure of 54.5%. The overall economy expanded for the 24th 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 10th consecutive month after four straight readings in contraction, registering 55.5%, up 0.2 percentage point compared to September’s figure of 55.3%. The October reading of the Production Index (59%) is 2.3 percentage points higher than the 56.7% recorded in September and the highest since November 2021 (60.5%). The Prices Index remained in expansion (or ‘increasing’ territory), registering 75.2%, a 2.7-percentage point decrease compared to September’s reading of 77.9%. The Backlog of Orders Index registered 54.6%, down 1.8 percentage points compared to the 56.4% recorded in September. The Employment Index reading of 52.4% is down 0.3 percentage point from September’s figure of 52.7%.”
Spence added, “The Supplier Deliveries Index indicated slowing performance for the 11th month in a row after one month in ‘faster’ territory. The reading of 59.1% is up 0.1 percentage point from its September reading of 59%. (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 51.4%, returning to expansion and up 2.8 percentage points compared to September’s reading of 48.6%. The Customers’ Inventories Index reading of 41.6% is the same as in September. The New Export Orders Index gained 0.3 percentage points in October for a reading of 51.2% versus 50.9% in September. The Imports Index registered 52.9%, an increase of 1.9 percentage points compared to September’s reading of 51%.”
Spence continued, “In October, U.S. manufacturing activity remained in expansion territory. Of the five subindexes that make up the PMI, four (New Orders, Production, Supplier Deliveries and Inventories) grew faster than the previous month, while Employment growth slowed down by 0.3 percentage point. In October, general sentiment got worse for a third month in a row, with 34% of the comments positive and 66% negative (a 1-to-2 ratio of positive to negative sentiment). Among negative comments, pricing volatility was mentioned in 62%, longer lead times 41%, tariffs 25% and the Iran war 21%; most comments mentioned multiple factors.”
Spence said, “In October, 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 the same rate as last month. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production. Regarding output, the Production Index expanded for the 12th month in a row, with the positive-to-negative comment ratio improving to 2 positive comments for every negative one (compared to the 1.6-to-1 ratio in September). The Employment Index remained in expansion but lost 0.3 percentage point. The positive-to-negative comments ratio on Employment was 1.8-to-1 in October.”
Spence concluded, “Finally, inputs (defined as supplier deliveries, inventories, prices and imports) were mixed, with the Supplier Deliveries Index increasing 0.1 percentage point, the Inventories Index gaining 2.8 percentage points and returning to expansion, and the Prices Index decreasing 2.7 percentage points. The Imports Index gained 1.9 percentage points, to 52.9% versus 51% in September. Looking at the manufacturing economy, 6% of the sector’s gross domestic product (GDP) contracted in October, compared to 2% in September, and 6% of manufacturing GDP was in strong contraction (defined as a composite PMI of 45% or lower), compared to 2% in September. 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 (Machinery; Computer & Electronic Products; Transportation Equipment; Chemical Products; and Food, Beverage & Tobacco Products) expanded in October.”
The 12 manufacturing industries reporting growth in October — listed in order — are: plastics and rubber products; electrical equipment, appliances and components; machinery; computer and electronic products; textile mills; primary metals; transportation equipment; fabricated metal products; furniture and related products; chemical products; miscellaneous manufacturing; and food, beverage and tobacco products. The three industries reporting a contraction in October are: printing and related support activities; paper products; and nonmetallic mineral products.
