Input Stories

The manufacturing sector contracted in September for the seventh month in a row, according to the latest ISM® Manufacturing PMI® Report. Those seven months were preceded by a brief blip of expansion, for two months, which in turn followed 26 straight months of contraction.

The numbers: The Manufacturing PMI® came in at 49.1% in September, increasing 0.4 percentage points from August’s reading of 48.7%. The overall economy is in its 65th month of expansion.

• “A Manufacturing PMI® above 42.3%, over a period of time, generally indicates an expansion of the overall economy,” according to the ISM.

More details: New orders contracted in September following growth in August, falling from 51.4% to 48.9%.

• Meanwhile, the production index posted an increase of 3.2 percentage points, rising from 47.8% in August to 51%.
• Prices are still increasing, coming in at 61.9%—though at a slightly slower pace than August’s reading of 63.7%.
• Respondents to the survey highlighted the burden of tariffs and volatile business conditions.

S&P: The S&P Global US Manufacturing Purchasing Managers’ Index, another measure of manufacturing activity, came in at 52.0 in September, down from 53.0 in the previous month.

• While any number above 50 indicates an expansion, the slight downturn signals that the sector is expanding at a weaker rate.

Some details: New orders rose only slightly in September, one of the causes of the weaker growth. Though new orders have increased again for the ninth month in a row, they are rising at a rate below the survey average.

• Meanwhile, “Exports were a source of demand weakness, falling overall for a third month in a row. Tariffs were reported to have weighed on export sales especially to Canada and Mexico,” according to S&P.
• Employment rose in September, while overall business activity expectations were also slightly higher than they were in August, even amid the ongoing trade uncertainty.

Inputs: Tariffs continue to raise input prices in September. This depressed purchasing activity, which ticked up only slightly from August.

The NAM’s data: According to the NAM’s Q3 Manufacturers’ Outlook Survey, firms are slightly more optimistic than in the previous quarter, but increasingly concerned about certain persistent problems, most importantly trade uncertainty, rising raw materials costs and increasing health care costs.