–ISM Manufacturing Index Flat at 47.2, Just Under Median Forecast of 47.6
–ISM’s Fiore: October Report to Show Hurricane Helen’s Full Impact on Supply Chains, Output
–Fiore: Fed’s As-Expected September Rate Cut Likely to Aid New Orders in Early 2025
–Fiore: Whichever Party Wins, US Pressure on China to Continue on Trade Front
By Max Sato
(MaceNews) – U.S. manufacturing activity contracted for the sixth straight month in September on continued sluggish demand as firms remain reluctant to invest in capacity amid uncertainty over the pace of the Federal Reserve’s unwinding of its tight monetary policy and the outcome of the presidential election next month, the latest monthly data from the Institute for Supply Management showed Tuesday.
The sector index compiled by the ISM, which indicates general direction, was flat at 47.2 after edging up 0.4 point to 47.2 in August and slumping 1.7 points to an eight-month low of 46.8 in July. The latest reading came in slightly weaker than the median economist forecast of 47.6.
“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,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement. “Production execution stabilized in September. Suppliers continue to have capacity, with lead times improving and shortages reappearing.”
The full impact of the damage caused by Hurricane Helene – massive disruptions of supply chains and production of plastics and steel, particularly on the Gulf coast – is expected to show in the ISM’s October report, which is likely to be a “cloudy” one, Fiore told reporters.
He said the Fed rate cut in September is likely to boost the sector in early 2025. He has said the expected first rate cut in four years by the Fed in September was unlikely to push up new orders for several months. He repeated his conviction that the manufacturing sector is stuck in a temporary trough.
Fiore said a 13% share of the manufacturers surveyed by the ISM is showing concern over Fed rate policy in the latest monthly report, up from 5% five months ago. Asked about uncertainty over U.S. election results regarding trade rows with China, he said he does not see a huge difference between the Democrats and Republicans, because whichever party wins, the pressure on China is likely to continue.
Among the five subindexes that directly factor into the manufacturing PMI, the new orders index contracted in September for the sixth consecutive month, registering 46.1, an increase of 1.5 percentage points compared to August’s figure of 44.6. It hasn’t indicated consistent growth since a 24-month streak of expansion ended in May 2022. The production index rose 5.0 points to 49.8 after slipping to 44.8 in August to remain the lowest since 34.2 in May 2020, when world demand plunged at the initial phase of the pandemic.
The employment index stood at 43.9, down 2.1 points from 46.0 in August. “Respondents’ companies are continuing to reduce head counts through layoffs, attrition and hiring freezes,” Fiore said. Asked about Fed Chair Jerome Powell’s latest assessment that the labor market is slowing but still solid, Fiore replied that the Fed chief is talking about the entire US economy while the manufacturing sector, which represents only 10% of the economy, has seen sluggish employment.
The supplier deliveries index rose 1.7 points to 52.2. This is the only ISM subindex that is inversed; a reading of above 50 indicates slower deliveries, which is typical as the economy improves and customer demand increases.
The manufacturing inventories index slipped back below the neutral line of 50, down 6.4 points at 43.9 after rising 5.8 to 50.3 in August, when it popped into expansion territory for the first time in 19 months. Fiore described the latest move as “cleanup.”
Among other subindexes, the prices paid index was at 48.3, down 5.7 points from the August reading of 54.0, thanks to less volatile commodity prices. Petroleum-derived products are showing weakness, aluminum is indicating slowing growth, corrugate and ocean freight are continuing growth and steel and steel products prices are easing. Fiore called the index’s recent range of 48 to 52 “a good stable level.”