According to a survey issued on Tuesday by the Institute for Supply Management, manufacturing activity in the United States declined in September.
According to the ISM, the manufacturing PMI remained constant from August to September at 47.2, with a number below 50 signifying contraction. The index was predicted by economists to gradually rise to 47.5. The manufacturing sector shrank for the sixth month in a row and for the 22nd time in the previous 23 months.
Speaking on this, the Chair of the ISM Manufacturing Business Survey Committee said “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.”
According to the ISM, the new orders index increased from 44.6 in August to 46.1 in September, but it continued to be in the contraction zone for the sixth straight month.
“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,” Fiore added.
According to Fiore, production execution steadied in September, and the report also stated that the production index increased from 44.8 in August to 49.8 in September.
In the meantime, the employment indicator decreased from 46.0 in August to 43.9 in September, indicating a greater pace of decline in manufacturing employment.
In addition, the pricing index fell from 54.0 in August to 48.3 in September, reflecting a decline in raw material costs following eight consecutive months of gains.
A separate report on service sector activity in September is expected to be released by the ISM on Thursday. With a number above 50 signifying expansion, the ISM’s services PMI is predicted to spike to 51.6 in September from 51.5 in August.
Conclusion
The decline in U.S. manufacturing activity, as indicated by the ISM report for September, reflects a persistent weakness in the sector, which has now contracted for 22 of the past 23 months. The PMI holding steady at 47.2 signals that the challenges within manufacturing, including weak demand and declining output, remain unaddressed.
Although there was a slight improvement in new orders and production execution, both indices still hover in contraction territory. The reluctance of companies to invest in capital and inventory highlights ongoing uncertainty fueled by federal monetary policy and upcoming elections. These factors, combined with a drop in manufacturing employment, paint a bleak picture of the sector’s short-term recovery.
Additionally, the decrease in the pricing index suggests that the cost of raw materials is finally stabilizing after months of price hikes, which could alleviate some cost pressures on manufacturers. However, this price reduction hasn’t translated into a rebound in employment or investment.
The broader economic outlook, especially with the upcoming services PMI report, may provide more context for the U.S. economy’s overall health. For now, the manufacturing sector’s contraction points to deeper structural issues that may take longer to resolve, particularly as uncertainties around policy and inflation linger.