A report released by the Institute for Supply Management on Friday showed U.S. manufacturing activity unexpectedly contracted at a modestly faster rate in the month of October.
The ISM said its manufacturing PMI fell to 46.5 in October from 47.2 in September, with a reading below 50 indicating contraction. Economists had expected the index to inch up to 47.6.
With the unexpected decrease, the manufacturing PMI dropped to its lowest level since hitting 46.5 in July 2023.
“After breaking a 16-month streak of contraction by expanding in March, the manufacturing sector has contracted the last seven months, said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.
The dip in the headline index partly reflected an accelerated contraction by production, as the production index slid to 46.2 in October from 49.8 in September.
Meanwhile, the report said the new orders index rose to 47.1 in October from 46.1 in September, although the reading below 50 still suggests a contraction.
“Demand remains subdued, as companies continue to show an unwillingness to invest in capital and inventory due to concerns (for example, inflation resurgence) about federal monetary policy direction in light of the fiscal policies proposed by both major parties,” said Fiore.
The employment index also crept up to 44.4 in October from 43.9 in September, but the index signaled contraction for the fifth consecutive month after an expansion in May.
A report released by the Labor Department earlier in the day showed employment in the manufacturing sector fell by 47,000 jobs in October due in part to the strike by Boeing (BA) machinists.
On the inflation front, the report said the prices index jumped to 54.8 in October from 48.3 in September, indicating raw materials prices increased after decreasing the month before.
The ISM is scheduled to release a separate report on U.S. service sector activity in the month of October next Tuesday.
Economists currently expect the ISM’s services PMI to dip to 53.3 in October from 54.9 in September, but a reading above 50 would still indicate growth.
Conclusion
The latest ISM report reveals persistent challenges in the U.S. manufacturing sector, which unexpectedly contracted at a faster rate in October, with the PMI dropping to 46.5. This continued contraction reflects restrained demand, as companies hold back on investments amid inflation concerns and unclear federal monetary policy directions.
Although there was a slight increase in new orders and employment indexes, both remain below 50, signaling ongoing contraction. Additionally, a surge in raw material prices underscores renewed inflationary pressures that could further strain manufacturers’ cost structures.
With employment in manufacturing also taking a hit, partly due to the Boeing strike, the sector’s outlook appears constrained, especially as inflationary concerns and economic uncertainties persist.
Article Source: RTT News
