Manufacturing Sector in Contraction, ISM Reports

The September Purchasing Managers Index found manufacturing activities failed to grow for the sixth consecutive month, with weak demand and declining output as businesses remain hesitant to invest in capital equipment or inventory expansions.

U.S. manufacturing activity remained in recession mode during September according to the latest Institute of Supply Management Purchasing Managers Index, a widely consulted source on economic conditions. The 47.2% reading was unchanged from August, based on 13 indicators collected from purchasing managers in 18 industrial segments.

The PMI uses 50 as a breakpoint between contraction and growth; a reading below 50 indicates contraction for the manufacturing sector, which has been the result over the past six months of reporting.

"U.S. manufacturing activity contracted again in September, and at the same rate compared to last month,” summarized ISM chairman Timothy R. Fiore. “Demand continues to be weak, output declined, and inputs stayed accommodative.”

Within the PMI matrix of factors, Fiore noted that the New Orders index improved 1.5 points from August to 46.1%; and the manufacturing Production index rose 5 points to 44.8%.  

Meanwhile, the manufacturing Prices index decreased 5.7 points to 48.3%, and Order Backlogs increased 0.5 points to 44.1%.

The manufacturing Employment index slipped -2.1 points from August to 43.9%.

Thirteen of the surveyed industrial segments fell below the growth margin during September, including Primary Metals, Transportation Equipment, Machinery, and Fabricated Metal Products.

"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,” according to Fiore.

The ISM chairman added several bullet points for emphasis:

-  “Production execution stabilized in September.

-  “Suppliers continue to have capacity, with lead times improving and shortages reappearing.

-  “77% of manufacturing gross domestic product (GDP) contracted in September, up from 65% in August.

-  “The share of manufacturing sector GDP registering a composite PMI® calculation at or below 45% (a good barometer of overall manufacturing weakness) was 41% in September, an 8-percentage point increase compared to the 33% reported in August.”

Written by:  Robert Brooks, a business-to-business reporter, writer, editor, and columnist for more than 20 years, specializing in the primary metal and basic manufacturing industries, for American Machinist.