ISM PMI Sees Manufacturing Contraction for Second Consecutive Month

OCT 3, 2019 - 6:25 am

Economic activity in the manufacturing sector contracted in September, though the overall economy grew for the 125th consecutive month, according to the nation’s supply executives in the latest Manufacturing ISM Report on Business.

The report was issued by Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee.

“The September PMI registered 47.8%, a decrease of 1.3 percentage points from the August reading of 49.1%,” said Fiore. “The New Orders Index registered 47.3%, an increase of 0.1 percentage point from the August reading of 47.2%. The Production Index registered 47.3%, a 2.2 percentage point decrease compared to the August reading of 49.5%. The Employment Index registered 46.3%, a decrease of 1.1 percentage points from the August reading of 47.4%. The Supplier Deliveries Index registered 51.1%, a 0.3 percentage point decrease from the August reading of 51.4%. The Inventories Index registered 46.9%, a decrease of 3 percentage points from the August reading of 49.9%. The Prices Index registered 49.7%, a 3.7 percentage point increase from the August reading of 46%. The New Export Orders Index registered 41%, a 2.3 percentage point decrease from the August reading of 43.3%. The Imports Index registered 48.1%, a 2.1 percentage point increase from the August reading of 46%.”

Fiore continued, “Comments from the panel reflect a continuing decrease in business confidence. September was the second consecutive month of PMI contraction, at a faster rate compared to August. Demand contracted, with the New Orders Index contracting at August levels, the Customers’ Inventories Index moving toward ‘about right’ territory and the Backlog of Orders Index contracting for the fifth straight month (and at a faster rate). The New Export Orders Index continued to contract strongly, a negative impact on the New Orders Index. Consumption (measured by the Production and Employment indexes) contracted at faster rates, again primarily driven by a lack of demand, contributing negative numbers (a combined 3.3-percentage point decrease) to the PMI calculation. Inputs — expressed as supplier deliveries, inventories and imports — were again lower in September, due to inventory tightening for the fourth straight month. This resulted in a combined 3.3 percentage point decline in the Supplier Deliveries and Inventories indexes. Imports contraction slowed. Overall, inputs indicate (1) supply chains are meeting demand and (2) companies are continuing to closely match inventories to new orders. Prices decreased for the fourth consecutive month, but at a slower rate.

“Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019. Overall, sentiment this month remains cautious regarding near-term growth,” said Fiore.

Of the 18 manufacturing industries, three reported growth in September: