Manufacturing Sector Weakens as October PMI Drops to Yearly Low
In October, the U.S. manufacturing sector contracted for the seventh consecutive month, with the Manufacturing PMI falling to its lowest reading in 2024 at 46.5%, indicating activity was contracting at a faster pace. New orders (47.1%), production (46.2%), inventories (42.6%) and backlog of orders (42.3%) remained in contraction, with production, inventories and backlog of orders at faster rates of decline. Supplier deliveries are still slowing, and demand continued to be weak, with companies hesitant to invest due to uncertainty about the direction of federal monetary policy as it relates to the election.
The New Orders Index continued its contraction for the seventh consecutive month but is up 1.0 percentage point from September. This decline reflects ongoing uncertainty and concern about a lack of new order activity, with only two major sectors−computer and electronic products and food, beverage and tobacco products−reporting an increase in new orders. While their confidence in the future economic environment remains low, it ticked up slightly in October.
The Production Index remained in contraction in October and is down 3.6 percentage points from September. Of the six largest manufacturing sectors, three (computer and electronic products; food, beverage and tobacco products; and fabricated metal products) reported increased production.
The Employment Index inched up 0.5 percentage points from September, still among the lowest readings since July 2020. Companies continued to reduce headcounts through layoffs, attrition and hiring freezes, with only the food, beverage and tobacco products and machinery sectors expanding employment in October.
The Prices Index rose 6.5 percentage points to 54.8%, indicating raw materials prices increased in October after decreasing the month before. Energy and transportation costs were the primary drivers, with crude oil and natural gas increasing somewhat, offset by weakness in the steel markets. Approximately 20% of companies reported paying higher prices, compared to 13% in September.