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In September, Texas factory activity declined modestly, and most indicators of manufacturing fell for the month. The production index turned negative to -3.2, signaling a slight decrease in output from August. The new orders index slipped slightly to -5.2, and the capacity utilization index dropped further to -7.0. After rebounding in August, the shipments index fell into negative territory again, declining nearly eight points to -7.0.

Overall business conditions remained negative, with the general business activity index holding relatively steady at -9.0 and the company outlook index improving to -6.4. The outlook uncertainty index, which has been volatile lately, surged nearly 10 points to 17.3 after a significant decrease in the previous month.

Labor market indicators pointed to some employment growth but slightly shorter workweeks in September. The employment index moved up four points, while the hours worked index held steady at -2.5. About 20% of firms reported hiring, while 17% noted layoffs. Moderate upward pressure on prices and wages persisted. The wages and benefits index ticked down to 18.5, roughly aligned with historical averages. The raw materials prices index fell significantly to 18.2, while the finished goods prices index remained nearly unchanged at 8.4.

The outlook for future manufacturing activity remained optimistic. The future production index rose to 35.2, while the future general business activity index was generally unchanged at 11.4.

In September, U.S. manufacturing moved further into contraction. The S&P Global U.S. Manufacturing PMI dropped to 47.3 in September from 47.9 in August, remaining below the 50 threshold that indicates a contraction in the sector.

Output and new orders fell at sharper rates in September amid stronger weakness in demand and political uncertainty. Employment also decreased at the steepest pace since the start of 2010, excluding the significant drop during the pandemic.

New export orders also declined to a larger extent in September, as demand weakened notably in Europe. With new orders continuing to fall, manufacturers scaled back production for the second consecutive month. The resulting drop in backlogs of work was the largest since January. Meanwhile, post-production inventories accumulated for the third straight month. Respondents felt generally optimistic about future business, buoyed by hopes that the current demand slump would be temporary and improve after the presidential election.

Input costs softened but remained marked, and manufacturers increased their selling prices at the fastest pace since April. The pace of inflation eased slightly despite higher costs for raw materials and a rise in shipping rates. The contraction in purchasing activity accelerated amid lower output, reducing input stocks by the largest amount seen in 2024.

In September, the global manufacturing sector contracted for the third consecutive month, with overall operating conditions declining at the fastest rate since October 2023. The J.P. Morgan Global Manufacturing PMI dropped to 48.8 in September from 49.6 in August. Four of the five PMI components were at levels consistent with contraction, while only the suppliers’ delivery times index posted growth. New business orders, new export orders and employment all declined at a faster rate than in August.

The Eurozone saw the steepest decline in production, led by Germany. Output in the U.S. fell deeper into contraction, while China stagnated for the third straight month. Growth in India, Brazil, Spain and the U.K. remained the fastest. Among 32 nations, only 10 reported increased manufacturing production in September, led by India.

Data broken down by sector pointed to widespread malaise across the global industry. The intermediate and investment goods industries both experienced a contraction in production, and, although expanding, consumer goods growth remained tepid. All three subindustries saw declines in new orders and new export business.

In September, manufacturers’ decision-making was targeted at minimizing costs and combating underutilized capacity. Employment fell for the second consecutive month and to the greatest extent since December 2023, as continued decreases in backlogs of work suppressed the need for workers. The ongoing downturn dipped confidence to a 22-month low in September. On the other hand, inflationary pressures continued to ease, registering the mildest rates of increase in both input costs and selling prices since March.

In September, the U.S. manufacturing sector contracted for the sixth consecutive month, with the Manufacturing PMI matching the figure in August at 47.2%. New orders (46.1%), production (49.8%) and backlog of orders (44.1%) remained in contraction, but at a slower rate of decline. Inventories dropped significantly from a rate of growth (50.3%) to contraction (43.9%), and supplier deliveries are still slowing. Demand continued to be weak, with companies hesitant to invest due to federal monetary policy and election uncertainty.

The New Orders Index continued its contraction for the sixth consecutive month but is up 1.5 percentage points from August. 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. Their confidence in the future economic environment remains at its lowest levels since the COVID-19 pandemic recovery.

The Production Index remained in contraction in September but is up 5.0 percentage points from August. 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 fell 2.1 percentage points from August, 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 September.

The Prices Index dropped 5.7 percentage points to 48.3%, indicating raw materials prices decreased in September after eight straight months of increases. Key commodity prices were less volatile, with petroleum-derived products showing weakness, aluminum indicating slowing growth, corrugate and ocean freight continuing growth and steel and steel products prices easing. Approximately 13% of companies reported paying higher prices, compared to 21% in August.

In August, the number of job openings rose to 8.0 million, an increase of 329,000 from the previous month but a decrease of 1,318,000 from the previous year. The job openings rate increased to 4.8%, up from 4.6% in July but down from 5.6% last year.

Job openings for manufacturing edged up slightly by 1,000 to 506,000 in August, with the increase of 12,000 job openings in nondurable goods making up for the decrease of 11,000 in durable goods. The manufacturing job openings rate stayed consistent at 3.8% from last month. The rate for durable goods manufacturing dropped from 4.0% to 3.9%, while it rose from 3.3% to 3.5% for nondurable goods.

The number of hires fell to 5.3 million from 5.4 million in August and are down 571,000 from the previous year. The hires rate dipped 0.1% to 3.3%. The hires rate for manufacturing declined 0.3% to 2.4%. The hires rate for durable and nondurable goods dropped to 2.2% and 2.7%, respectively.

Total separations, including quits, layoffs, discharges and other separations, fell 317,000 from July to right under 5.0 million and are down 612,000 from the previous year. The total separations rate declined to 3.1% and to 2.5% for manufacturing. The quit and layoff rates continue to remain lower for manufacturing than the total nonfarm sector.

Nonfarm payroll employment increased by 254,000 in September, blowing past the consensus estimate of 150,000 job gains. July and August job gains were also revised upward by 72,000 jobs. The 12-month average stands at 203,000 job gains per month. Manufacturing employment, however, declined by 7,000, largely influenced by a 6,500 decrease in motor vehicles and parts. In addition, August’s 24,000 manufacturing job loss was revised down to 27,000. The unemployment rate dipped 0.1 percentage point to 4.1%, while the labor force participation rate remained unchanged at 62.7%.

The employment-population ratio ticked up slightly to 60.2%, though it’s down 0.2 percentage points from a year ago. Employed persons who are part-time workers for economic reasons decreased by 206,000 to 4.6 million but are up from 4.1 million in September 2023. Native born employment is up over the month but down 825,000 over the year. Meanwhile, foreign born employment is up 1,201,000 over the year.

Average hourly earnings for all private nonfarm payroll employees rose 0.4%, or 13 cents, reaching $35.36. Over the past year, earnings have grown 4.0%. The average workweek for all employees edged down by 0.1 hour to 34.2 hours in September.

After days of disruption, and sustained advocacy by the NAM to keep manufacturers’ concerns at the forefront, the East Coast and Gulf Coast ports strike has ended, allowing for the resumption of normal operations crucial to manufacturers and the broader supply chain.

Background on the strike: The strike, which began earlier this week, had halted operations at key shipping terminals stretching from Boston to Houston, exacerbating the backlog at some of the busiest ports in the U.S. (Reuters , subscription). NAM data on the effects of a prolonged strike—including a hit to the U.S. GDP by as much as $5 billion a day—was cited widely by supporters of a compromise that would keep ports open as negotiations continued.

• The tentative agreement is for a wage hike of around 62% over six years, Reuters reports, with the current Master Contract extending until January to allow for ports to remain open as a final contract is negotiated.

Impacts on manufacturing: NAM members voiced deep concerns over shipment delays and the effects on production timelines. The strike impacted everything from raw materials to finished goods, underscoring the interconnectedness of the global supply chain and domestic manufacturing.

• “Manufacturers are encouraged that cooler heads have prevailed and the ports will reopen,” NAM President and CEO Jay Timmons said in a statement . “This decision avoids the need for government intervention and invoking the Taft-Hartley Act, and it is a victory for all parties involved—preserving jobs, safeguarding supply chains and preventing further economic disruptions.”

Resolution and next steps: The resolution came after intense negotiations facilitated by federal mediators, with both parties agreeing to resume operations while finalizing contract details. The NAM will monitor developments and remain engaged with policymakers to support stable labor conditions at key ports.

“Manufacturers depend on the stability of our ports to continue building, innovating, delivering products to American families and supporting communities across the country,” Timmons continued. “Another strike would jeopardize $2.1 billion in trade daily… We cannot afford that level of economic destruction.”

As part of its “Manufacturing Wins” tax campaign, the NAM’s small and medium-sized manufacturers are drawing lawmakers’ attention to R&D amortization, an uncompetitive tax policy that’s killing jobs and dragging down the world’s most innovative economy.

The problem: “Allowing companies like Sukup Manufacturing to immediately expense R&D investments had been part of the tax code for more than 70 years,” explained Steve Sukup, president and CEO of the Sheffield, Iowa–based company. “But since 2022, we have had to amortize our R&D expenses over five years.”

• “This affects manufacturers everywhere and has a dramatic impact on the U.S. economy, as the private sector accounts for more than 75% of total R&D spending—with small businesses accounting for approximately $90 billion of all private-sector R&D investments.”
• Another heavily impacted manufacturer is Husco of Waukesha, Wisconsin. “In 2024, we have $20 million less liquidity than we would have under the old R&D expensing rules,” said Husco President and CEO Austin Ramirez. “That $20 million represents almost our entire capital budget for 2024.”

Threatening jobs: “Limiting R&D doesn’t just limit innovation—it also has a direct impact on people’s jobs here,” said Tom Tredway, president of Erie Molded Packaging in Pennsylvania. “And these are quality, high-paying jobs—but they are at risk if immediate R&D expensing isn’t restored.”

• “Bringing a new medical device to market is a multiyear process, necessitating significant investments in R&D,” explained Chuck Wetherington, president of BTE Technologies in Hanover, Maryland. “Being required to amortize our R&D expenses has forced us to staff our technical team at a reduced level, slowing down the development of new products.”

Handing a win to China: “China allows a ‘super deduction’ for manufacturing R&D equal to 200% of research costs. That is what we are up against,” said Lisa Winton, who co-founded Winton Machine Company in Suwanee, Georgia. “Meanwhile, Belgium is the only other developed nation with an amortization requirement like the United States.”

• “When you look at the generosity of foreign support, especially China’s, versus the United States, it’s so lopsided,” said Daryl Bouwkamp, who serves as Vermeer Corporation’s senior director of international business development and government affairs. “China is trying to drive behavior toward R&D—and that’s something we’re lacking.”
• “Suddenly, China started manufacturing bagel baskets and shipping them to New York City for cheaper than I could get the steel,” recalled Drew Greenblatt, president and owner of Marlin Steel Wire Products. “We realized we couldn’t thrive in a commodities market. … We [need] to be able to say to buyers, ‘You must buy from the American innovative company because we’re coming up with such slick ideas that our product blows the competition away.’”

Innovation at risk: “[Now is the time] we most need to make investments in innovation, both around the technologies that we provide in our products enabling the United States’ economic growth and success [and] the technologies we use to produce the products that we make,” said Karl Hutter, CEO of Click Bond in Carson City, Nevada.

• Patricia Miller of M4 Factory in Woodstock, Illinois, highlighted that manufacturers are key to meeting the world’s most intractable challenges: “We need to keep those [companies] that are driving the future of innovation and manufacturing in the U.S. economically viable and competitive.”

The last word: “Congress not allowing manufacturers to immediately expense R&D expenses directly translates to fewer quality jobs in the manufacturing sector while our foreign competitors are implementing vastly more beneficial R&D benefits,” Tredway concluded.

Within days of Hurricane Helene’s landfall, manufacturers were reaching out to help those who had been affected.

What’s going on: Companies from an array of industries are volunteering their resources, time and energy to getting storm victims essential items. Helene, which made landfall in Florida last Thursday, has killed at least 189 people and left more than 1.2 million customers without power (ABC News).

• Toyota is matching donation contributions made by its U.S.-based employees to the American Red Cross, disaster relief organization SBP and other nonprofits. The auto manufacturer is also offering payment relief options to those affected.
• Norfolk Southern Corp. has donated $100,000 to the American Red Cross, which is undertaking relief work across multiple states, including North Carolina, Florida, Georgia and Tennessee. The company’s Employee Disaster Relief Program is also giving employees affected by the storm grants for qualified expenses and losses.
• DENSO North America Foundation, the philanthropic group of global automotive components manufacturer DENSO, is donating $200,000 to the American Red Cross in support of disaster relief across southeastern states.
• Procter & Gamble’s Disaster Relief is partnering with Walmart and Matthew 25: Ministries, an international aid organization, in their recovery efforts in the hard-hit Florida cities of Perry and St. Petersburg. P&G resources will go toward a Tide Loads of Hope Mobile Laundry Unit, powered by Matthew 25: Ministries, to offer free, full-service laundry to responders and affected residents. Shower trailers with hot water will also be provided.

Additional resources: SBP and Good360 offer manufacturers disaster preparedness resources and training when natural disasters hit.

• “Hurricane Helene has been devastating, leaving many without access to power and vital resources,” NAM President and CEO Jay Timmons wrote in a social post Wednesday. “Manufacturers looking for recovery resources or looking to provide supplies can connect with SBP via sbpusa.org and Good360 via good360.org.”

Share your stories: Are you helping those affected by Helene? Tell us how by emailing [email protected].

The NAM recently talked to Sen. Todd Young (R-IN) about the importance of reinstating immediate expensing for research-and-development expenditures. Here’s the full interview:

NAM: Sen. Young, Congress is facing a “Tax Armageddon” next year, as crucial provisions from 2017’s Tax Cuts and Jobs Act are set to expire. As a member of the Senate Finance Committee, what is your focus moving into next year’s debate?

Sen. Young: The Tax Cuts and Jobs Act was a great success—millions of Americans, especially those in the middle class—saw their taxes go down. Corporate tax receipts went up. We stemmed the tide of corporate inversions, and many companies chose to return their operations and tax bases to the United States. If Congress does not act next year to extend provisions of the TCJA, we will undo all of these victories and inflict long-lasting damage on our economy. As we prepare for next year, I am focused on evaluating how best we can build upon our TCJA successes and continue to adopt pro-growth, fiscally responsible tax policy that helps hardworking Americans thrive.

NAM: As you know, for nearly 70 years, manufacturers in the U.S. were able to fully deduct their R&D expenses in the year incurred. Beginning in 2022, however, manufacturers were forced to spread their deductions over several years, greatly harming our ability to grow and compete. What is Congress doing to restore immediate R&D expensing?

Sen. Young: For several years now, I have advocated for the American Innovation and Jobs Act (S. 866), my bill with Sen. Maggie Hassan (D-NH) that would restore full and immediate expensing of R&D expenditures. We first introduced the bill back in 2020 well before the provision expired, and I am disappointed that we are now reaching the end of 2024—nearly three years after the law shifted to amortization of R&D investments—and Congress has yet to pass our bill to fix this crucial issue. As our global competitors, like China, are expanding their R&D incentives, we simply cannot allow our nation and our economy to be left behind. Congress must work to restore our R&D incentives as soon as possible, and this will be one of my top priorities heading into next year’s tax negotiations.

NAM: As a senator who was there during the Tax Cuts and Jobs Act, you know how impactful the legislation was for manufacturers to be able to compete on a global level. As we get closer to next year, what are you hearing from stakeholders on the need for pro-growth tax policy so American businesses can engage and grow around the world?

Sen. Young: At the risk of oversimplifying the issue, it really comes down to competitiveness. A lot of the work I have done in the tax space as well as in other areas is focused on ensuring that America’s position as a global leader remains strong. Without growth, our economy suffers and our ability to remain internationally competitive is diminished. This is a massive national security risk. So, as I look ahead to what next year may hold in the tax arena, I am focused on pro-growth tax policy. We need to be thinking creatively about ways we can add value to our economy and, in turn, ensure Americans are better off.

In different industries this takes on different forms; however, one common thread is the need for R&D. To grow and develop new products, businesses have to put significant amounts of capital into R&D costs, both domestically and internationally. That is why one of my core areas of focus continues to be restoring full and immediate expensing of R&D costs. It is vital for the health of our economy that we take this action, which allows safer and more innovative products to be brought to the marketplace; increases the number of [well]-paying, high-skilled jobs; and secures U.S. interests abroad by ensuring we remain globally competitive.

NAM: Thank you, Sen. Young. What else can NAM members do to stay engaged and be a resource for you going into next year?

Sen. Young: I have always appreciated the NAM’s partnership and advocacy as we work together on these important issues. I would encourage NAM members to continue sharing stories with their elected federal officials of the importance of these tax incentives, like R&D, that enable the creation of high-quality jobs, promote our national competitiveness and strengthen our economy. Your voice matters.