The US manufacturing sector indicator remained at a weak level in September, but the volume of new orders improved and the prices paid for inputs fell to a nine-month low, which, combined with the decline in the US interest rate , of the Federal Reserve, bodes well for a recovery in activity in the coming months.
The Institute for Supply Management (ISM) reported Tuesday that its manufacturing purchasing managers’ index (PMI) remained unchanged at 47.2 last month. A PMI below 50 indicates a contraction in the industrial sector, which represents 10.3% of the North American economy.
This was the sixth consecutive month that the PMI remained below the 50 mark, but above the 42.5 level which, according to the ISM, generally indicates an expansion in the overall economy over time.
However, the survey exaggerates the weakness of the industrial sector, with data such as industrial production and durable goods orders showing that the sector is largely showing some resilience.
Gross domestic product (PMI) data last week showed manufacturing output grew at an annualized rate of 2.6% in the second quarter, an acceleration from the 0.2% pace recorded in the January-March quarter . Further gains are likely after the Fed cut rates last month for the first time since 2020.
The US central bank is expected to make two more cuts in November and December.
The survey’s new orders sub-index increased from 44.6 in August to 46.1 last month. Production showed a recovery, with the sub-index rising to 49.8 from 44.8 in August.
Manufacturers have faced low cost pressures, although a port strike by members of the International Longshoremen’s Association that began Tuesday could disrupt supply chains and raise input prices.
The survey measure of prices paid by producers fell to 48.3, the lowest level since December 2023, from 54.0 in August. The supplier deliveries indicator increased to 52.2 from 50.5 in the previous month. A reading above 50 indicates slower deliveries.
The decline in factory employment has deepened, which could pose a downside risk to the September jobs report. The manufacturing employment index fell to 43.9 from 46.0 in August.
Source: Terra
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