US Manufacturing Activity Contracts as the Economy Struggles

US Manufacturing Activity Contracts

The latest report shows that manufacturing activity in the US has remained weak in September, marking the sixth consecutive month in contraction territory. The ISM manufacturing PMI held steady at 47.2, indicating sluggishness in the economy. A level below 50 in the Institute for Supply Management index signifies contraction, with new orders rising to 46.1 from 44.6.

Prices paid by manufacturers fell to their lowest in nine months at 48.3, while factory production and durable goods orders remained relatively steady. However, employment suffered, with the manufacturing employment index declining to 43.9 from 46.0, reflecting the fourth straight month of contraction.

Challenges Facing Manufacturing

• Ongoing port strikes
• Production disruptions from hurricane Helene
• Limited capital spending due to election uncertainty

According to responses from the PMI survey, many industries anticipate that the Federal Reserve's rate cuts and the November election will pave the way for a more stable trading environment in 2025.

The Context of Current Manufacturing Trends

The Boeing strike, which began in mid-September, is exacerbating the slowdown in the aerospace and transportation equipment sector. Additionally, October's survey results are expected to be influenced by ongoing production disruptions from recent hurricanes and port strikes on the eastern and central coasts.

In September, five manufacturing industries, including petroleum & coal products and food, beverage & tobacco products, reported growth, while 13 sectors, led by printing, plastics, and wood products, indicated contraction. ISM chair Timothy Fiore noted that “demand remains subdued, as companies showed an unwillingness to invest in capital and inventory due to federal monetary policy and election uncertainty.”