Manufacturing ISM Contracts Third Month, Production Down Sharper

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The manufacturing sector entered its third month of contraction with production falling faster.

The October 2019 Manufacturing ISM® Report On Business® shows the manufacturing PMI as 48.3.

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. Demand contracted, with the New Orders Index contracting marginally, the Customers’ Inventories Index moving into ‘about right’ territory and the Backlog of Orders Index contracting for the sixth straight month (and at a faster rate). The New Export Orders Index surged into expansion territory, likely contributing to the slowing contraction of the New Orders Index. Consumption (measured by the Production and Employment indexes) contracted, due primarily to lack of demand, but contributed positively (a combined +0.3-percentage point increase) to the PMI® calculation. Inputs — expressed as supplier deliveries, inventories and imports — were again lower in October, due primarily to supplier delivery contraction offset by improvements in inventories. This resulted in a combined 0.4-percentage point net improvement in the Supplier Deliveries and Inventories indexes. Imports contraction quickened. Overall, inputs indicate (1) supply chains are meeting demand and (2) companies are more confident that materials received will be consumed in a reasonable time period. Prices decreased for the fifth consecutive month, at a faster rate.

Five Growth Areas

Furniture & Related Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Wood Products; and Computer & Electronic Products.

Twelve Contracting Areas

Primary Metals; Apparel, Leather & Allied Products; Textile Mills; Transportation Equipment; Plastics & Rubber Products; Machinery; Chemical Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Miscellaneous Manufacturing; and Paper Products.

Headline PMI

The overall PMI is the average of new orders, production, employment, supplier deliveries, and inventories.

Mike "Mish" Shedlock

Comments (3)
No. 1-2
ksdude69
ksdude69

In order to circumvent tariffs, my company is shifting part of our production from the US to the EU. Thanks Trump.