Economic activity in the manufacturing sector contracted in September for the seventh consecutive month, according to the nation's supply executives in the Institute for Supply Management’s latest Purchasing Managers Index (PMI).
Although the overall U.S. economy is still growing, tariffs and supply chain impacts look to be keeping the manufacturing industry in contraction territory. The ISM’s PMI index for September was at 49.1%, up 0.4 percentage points from the August Index of 48.7%, but still in contraction territory. Any reading below 50% indicates an industry in contraction.
Of the five subindexes that directly factor into the Manufacturing PMI, only two – Production and Supplier Deliveries – remain in expansion territory. New Orders returned to contraction, the Employment Index increased but remains in contraction territory, and the Inventories Index had a faster rate of contraction.
Susan Spence, MBA, Chair of the Institute for Supply Management Manufacturing Business Survey Committee, said production growth was the biggest factor in the 0.4 percentage point gain in the Manufacturing PMI in September.
“However, the combined drops in the New Orders and Inventories indexes (4.2 percentage points) exceeded the increase in the Production Index (3.2), rendering the Manufacturing PMI improvement negligible,” Spence said.
“Last month’s increase in new orders (an index gain of 4.3 percentage points from July to August) seems to have flowed through to production but does not appear to be sustainable given the subsequent drop in new orders in September,” she said.
Only five manufacturing industries reported growth in September: Petroleum & Coal Products; Primary Metals; Textile Mills; Fabricated Metal Products; and Miscellaneous Manufacturing.
The 11 industries reporting contraction in September were: Wood Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Paper Products; Furniture & Related Products; Chemical Products; Electrical Equipment, Appliances & Components Transportation Equipment; Nonmetallic Mineral Products; Machinery; and Computer & Electronic Products.
The PMI is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at manufacturing firms nationwide. Respondents cited the impact of U.S. tariffs and concerns about the direction of the U.S. economy in the survey.
