Economic activity in the manufacturing sector contracted in September for the sixth consecutive month and the 22nd time in the last 23 months, according to the Institute for Supply Management’s (ISM) latest Report On Business.
The report was issued by Timothy R. Fiore, chair of the ISM manufacturing business survey committee.
“The manufacturing PMI registered 47.2% in September, matching the figure recorded in August. The overall economy continued in expansion for the 53rd month after one month of contraction in April 2020. (A manufacturing PMI above 42.5%, over a period of time, generally indicates an expansion of the overall economy.)” Fiore said. “The new orders index remained in contraction territory, registering 46.1%, 1.5 percentage points higher than the 44.6% recorded in August. The September reading of the production index (49.8%) is 5 percentage points higher than August’s figure of 44.8%. The prices index went into contraction (or ‘decreasing’) territory for the first time this year, registering 48.3%, down 5.7 percentage points compared to the reading of 54% in August. The backlog of orders index registered 44.1%, up 0.5 percentage point compared to the 43.6% recorded in August. The employment index registered 43.9%, down 2.1 percentage points from August’s figure of 46%.
“The supplier deliveries index indicated slowing deliveries, registering 52.2%, 1.7 percentage points higher than the 50.5% recorded in August. (Supplier deliveries is the only ISM Report On Business 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 43.9%, down 6.4 percentage points compared to August’s reading of 50.3%,” Fiore said. “The new export orders index reading of 45.3% is 3.3 percentage points lower than the 48.6% registered in August. The imports index remained in contraction territory in September, registering 48.3%, 1.3 percentage points lower than the 49.6% reported in August.”
“U.S. manufacturing activity contracted again in September, and at the same rate compared to last month. Demand continues to be weak, output declined and inputs stayed accommodative. Demand slowing was reflected by the (1) new orders index remaining in contraction territory, (2) new export orders index contracting at a faster rate, (3) backlog of orders index staying in strong contraction territory, and (4) customers’ inventories index indicating customers’ inventories were ‘about right,’” Fiore said. “Output (measured by the production and employment indexes) continued in contraction with mixed results: employment shrunk at a faster rate while production approached expansion, with levels on par compared to August. Panelists cited continuing efforts by their companies to right-size workforces to levels consistent with projected demand. Inputs — defined as supplier deliveries, inventories, prices and imports — generally continued to accommodate future demand growth, with inventories returning to low levels and suppliers showing some difficulty in meeting customer needs.”
“Demand remains subdued, as companies showed an unwillingness to invest in capital and inventory due to federal monetary policy — which the U.S. Federal Reserve addressed by the time of this report — and election uncertainty. Production execution stabilized in September,” Fiore said. “Suppliers continue to have capacity, with lead times improving and shortages reappearing. Seventy-seven percent of manufacturing gross domestic product (GDP) contracted in September, up from 65% in August. The share of manufacturing sector GDP registering a composite PMI calculation at or below 45% (a good barometer of overall manufacturing weakness) was 41% in September, an eight-percentage point increase compared to the 33% reported in August. Only one of the six largest manufacturing industries — food, beverage and tobacco products — expanded in September, compared to two in August.”
The five manufacturing industries reporting growth in September are:
- Petroleum and coal products
- Food, beverage and tobacco products
- Textile mills
- Furniture and related products
- Miscellaneous manufacturing
The 13 industries reporting contraction in September — in the following order — are:
- Printing and related support activities
- Plastics and rubber products
- Wood products
- Apparel, leather and allied products
- Primary metals
- Transportation equipment
- Nonmetallic mineral products
- Electrical equipment, appliances and components
- Paper products
- Machinery
- Chemical products
- Fabricated metal products
- Computer and electronic products
