U.S. manufacturing activity edged up in October but still remains in contraction territory, according to the Institute for Supply Management’s October survey of manufacturing executives.
The ISM’s report, released Friday, Nov. 1, finds U.S. manufacturing activity inched up 0.5% in October to a current reading of 48.3%. Any reading below 50 indicates contraction.
October's reading is in keeping with recent economic data released last month, including a Commerce Dept. report that found orders for durable manufactured goods declined in September.
This month’s ISM report coincides with a report from the U.S. Department of Labor, which found the U.S. manufacturing sector slashed 36,000 jobs in October, despite the U.S. adding 128,000 jobs overall. It should be noted, however, that strike activity in the auto industry influenced October’s labor report on manufacturing. U.S. motor vehicle parts employment declined by 42,000, according to the Labor Department.
New orders, production and employment continue to contract, according to the ISM, while exports have grown and imports have contracted.
Said Timothy Fiore, Chairman of the ISM: “Comments from the panel reflect an improvement from the prior month, but sentiment remains more cautious than optimistic. October was the third consecutive month of PMI contraction, at a slower rate compared to September.”
Responses from October’s survey describe a climate of sluggish global demand, uncertainty over tariffs, and a continued slowdown in the auto industry.
Fiore continued: “Global trade remains the most significant cross-industry issue. Food, beverage & tobacco products remains the strongest industry sector and transportation equipment the weakest sector.”
Of eighteen industries, just five reported growth in October. Growth was seen only in furniture & related products; printing & related support activities; food, beverage & tobacco products; wood products; and computer & electronic products.
Contraction was sharpest in primary metals; apparel, leather & allied products; and textile mills.
What U.S. Manufacturers Are Saying About Business Conditions:
The ISM’s report included several responses from manufacturing executives in a broad spectrum of industries, and reflected continued concerns about trade issues, slowing customer demand and price issues, though for some, business conditions continue to be strong.
Said one respondent in the fabricated metals sector: “Been hearing from lots of my suppliers that their business is down and [they are] looming for more work in the metal processing [and] machining areas. We remain very busy.”
Another in the chemical products industry noted: “The chemical manufacturing industry is depressed; demand across many markets globally is down, and pricing is as a result.”
Related: What U.S. Manufacturers Were Saying About Tariffs in 1930
Said another in the plastics industry: “Business for thermoplastic resins is very strong, but margins continue to be under pressure due to tariffs and global economic uncertainty.”
A slowdown in the auto industry continues to impact manufacturers across the automotive supply chain.
Said one executive in the primary metals industry: “Automotive related manufacturing is definitely slowing in the U.S. I think we are seeing the negative impacts of the tariff war with China and the unsigned [U.S.-Mexico-Canada Agreement] deal starting to hurt consumer confidence, especially on large purchases. Corporations are slowing orders/production accordingly."
New Orders Recover Lost Ground, But Still Contracting
The ISM’s New Orders Index recovered 1.8 percentage points in October, rising to a level of 49.1%. October marks the third consecutive month of contraction for the index, though last month saw an improvement in new orders.
Only five of eighteen industries reported growth in new orders, led by wood products, furniture & related products; and food, beverage & tobacco products.
Manufacturing Production Sinks
The ISM’s Production Index declined for a third straight month in October, falling 1.1% to its current level of 46.2%.
Apart from a surprise 2.8% increase in June, the Production Index has flatlined over the latter half of 2019 before finally falling into contraction.
Six of eighteen industries reported growth in October. Production growth was led by printing & related support activities, while textile mills led contraction in October.
Employment Edges Up
Manufacturing employment moved into its third straight month of contraction in October, with that reading coming in at 47.7%. This is a slight improvement over September’s reading of 46.3%.
Five of eighteen industries reported an increase in hiring for October, with printing & related support activities and textile mills reporting an increase in hiring and decreases sharpest in apparel.
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