US manufacturing activity barely contracts in September

Al Greenwood

02-Oct-2023

HOUSTON (ICIS)–An index measuring US manufacturing activity rose by 1.4 points to 49%, placing it barely in the territory indicating contraction, the Institute for Supply Management (ISM) said on Monday.

The following chart shows the performance of the manufacturing PMI over several years and during recessions.

September marked the 11th month that the ISM’s manufacturing purchasing managers index (PMI) was below 50, the threshold between contraction and expansion.

Although the September purchasing PMI still indicated contraction, it rose more than expected, and it may point to signs that the downturn in manufacturing is bottoming out, said Kevin Swift, ICIS senior economist for global chemicals.

“Demand remains soft, but production execution improved compared to August as panellists’ companies prepared for Q4,” Swift said.

Suppliers continue to have capacity, and customer inventories fell deeper into the territory considered to be too low, he said. Such low inventories are a positive for future output.

Meanwhile, prices fell again amid weak demand, he said. Employment improved.

Overall, the manufacturing PMI figures provide further evidence of a rolling recession, in which different parts of the economy contract at different times.

Although the September PMI report was better than expected, one month does not make a trend, Swift said. The services industry seems to continue expanding, and the upcoming nonmanufacturing PMI should provide more clues when it is released on Wednesday.

The chemical industry registered its 13th month of decline.

“We need to coordinate very closely with suppliers in order to yield a more cost-competitive offer,” according to a comment from a participant in the chemical industry. “More back and forth is needed to reach a reasonable total price.”

The following table breaks down the manufacturing PMI.

Index Series Index Sep Series Index Aug Percentage Point Change Direction Rate of Change Trend* (Months)
Manufacturing PMI® 49 47.6 1.4 Contracting Slower 11
New Orders 49.2 46.8 2.4 Contracting Slower 13
Production 52.5 50 2.5 Growing From Unchanged 1
Employment 51.2 48.5 2.7 Growing From Contracting 1
Supplier Deliveries 46.4 48.6 -2.2 Faster Faster 12
Inventories 45.8 44 1.8 Contracting Slower 7
Customers’ Inventories 47.1 48.7 -1.6 Too Low Faster 4
Prices 43.8 48.4 -4.6 Decreasing Faster 5
Backlog of Orders 42.4 44.1 -1.7 Contracting Faster 12
New Export Orders 47.4 46.5 0.9 Contracting Slower 4
Imports 48.2 48 0.2 Contracting Slower 11
OVERALL ECONOMY Growing From Contracting 1
Manufacturing Sector Contracting Slower 11

*Number of months moving in current direction.

(recast headline, replacing PMI with activity)

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