U.S. Manufacturing Activity Cools in October as Demand Eases
Posted by IndustryNet on Tuesday, November 1, 2022
U.S. manufacturing activity growth slowed again in October, according to the Institute for Supply Management’s October survey of supply chain executives.
Details on U.S. Manufacturing Activity in October 2022
The ISM reports its index of manufacturing activity inched down 0.7% in October to a near-contractionary reading of 50.2%, with growth stuck at its lowest point since the pandemic troughs of May and June 2020.
A reading of 50 or above signals expansion.
Demand continued to soften in October, with the ISM’s New Orders Index advancing 2.1% in October, but still stuck in contraction, with a final reading of 49.2%. Output was strong in October, increasing 1.7% to a reading of 52.3%, helped by a 1.3% increase in the employment index, which edged back into contraction in October, posting a reading of 50.9%.
Notable in October was an improvement in supplier deliveries, which posted its best reading since March 2009 at 46.8%, ending a 79-month streak of slow deliveries.
Prices continued to fall in October, with the ISM’s Prices Index falling 5.1% to a reading of 46.6%, while the Backlog of Orders Index also fell, down 5.6% to 45.3% and the New Export Index remained stuck in contraction for a third straight month.
Timothy Fiore, the Chairman of the ISM notes that the U.S. manufacturing sector “continues to expand, but at the lowest rate since the coronavirus pandemic recovery began. With panelists reporting softening new order rates over the previous five months, the October index reading reflects companies preparing for potential future lower demand.”
In October, eight of eighteen industries reported growth, strongest in apparel, leather and allied products; and nonmetallic mineral products. Machinery; petroleum and coal products; and transportation equipment, which are among the largest industries surveyed, registered moderate to strong growth in October.
What Manufacturers Are Saying About Business Conditions
Comments from manufacturers revealed continued improvement in supply chain constraints, labor shortages and prices, tempered by concerns over slowing market demand, global conflicts, and the potential for recession in the coming year.
One executive in the food products industry reported, “Growing threat of recession is making many customers slow orders substantially. Additionally, global uncertainty about the Russia-Ukraine (war) is influencing global commodity markets.”
Another in the electrical equipment, appliances, and components stated, “Housing market is down, so our business is affected. Capacity has increased over the last two years due to high orders of consumer goods and appliances, so now we’re trying promotions to get our orders up to where we can use all our capacity.”
One panelist in the nonmetallic mineral products sector stated, “International conditions loom large and seem very foreboding. Overall, we still think 2023 will be a positive year, with at least some moderate growth.”
While another in the transportation equipment sector reported, “Challenges with labor and parts delivery are easing. Order levels are slowing down after pent-up demand in the previous month.”
Recession-proof Your Business
After months of supply chain constraints and historic demand, the U.S. manufacturing climate is shifting once again. Softening demand, staffing shortages, and a looming recession means industrial companies are setting their sights on new products and services to help them weather the storm.
You’ll want to be the first person they think of when they do.
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