U.S. manufacturing activity grew at its slowest pace in two-and-a-half years in September, according to the Institute for Supply Management’s September survey of supply chain executives.
The ISM reports its index of manufacturing activity dipped 1.9% in September to a reading of 50.9% -- the lowest reading the sector has recorded since May of 2020, marking the industry's 28th consecutive month of expansion.
Demand slowed considerably in September, while price pressures continued to ease. The ISM’s New Orders Index fell 4.2% into a contractionary reading of 47.1%. The Production Index held steady at 50.6%, imports continued to expand at 52.6%, while the ISM’s Exports Index fell to its lowest reading since June 2020, coming in at 47.6%.
The much-watched employment index contracted sharply in September, falling 5.5% to a reading of 48.7%. Meanwhile, price pressures continued to ease for the sector after reaching historic highs at the start of the year, with the ISM’s Prices Index declining to 51.7% -- its lowest reading since June 2020.
Timothy Fiore, the Chairman of the ISM notes that the U.S. manufacturing sector “continues to expand, but at the lowest rate since the pandemic recovery began.” Fiore notes that companies “Slowed hiring activity; month-over-month supplier delivery performance was the best since December 2019; price growth slowed notably (with the index at 60 percent or lower) for the third consecutive month; and lead times continue to ease for capital equipment and production materials.”
Fiore also noted the absence of any large-scale reports of layoffs, suggesting that companies are confident of near-term demand.
In September, nine of eighteen industries reported growth, strongest in non-metallic mineral products; plastics and rubber products; miscellaneous manufacturing; apparel, leather & allied products; transportation equipment; and food, beverage & tobacco products.
What Manufacturers Are Saying About Business Conditions
Comments from manufacturers revealed continued strength in the sector, tempered by lingering supply chain issues and labor shortages, with some expressing concern over a global economic slowdown.
One executive in the chemicals products industry reported, “Concerns of global economic slowdown are growing, and (we are) experiencing some customers pulling back orders.”
Another in the electrical equipment sector noted, “Business continues to be strong. Some commodities within the supply chain are starting to stabilize, while others are still causing disruption for production. Electrical and wiring components continue to cause significant issues. (We) cannot run as consistently as we would like.”
An executive in the plastics and rubber products industry said, ““Business is still strong; raw materials are becoming more available, and some raw materials prices are falling.”
“Business is flat to down due to inflation and interest rates. Hard to find and keep employees due to wage increases by competitors,” said a respondent in the fabricated metals sector, while another in the electronic products sector stated “Supply chain issues for all electronic components and custom build-to-print materials are in short supply due to capacity and skilled labor shortages. Energy cost continues to negatively impact freight cost.”
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