ISM Manufacturing Index Stays Positive in September, But Barely

ISM Manufacturing Index Stays Positive in September, But Barely

The monthly purchasing managers' index for September indicates weak growth for U.S. manufacturing as low crude prices and a weaker Asian economy weigh on companies.

U.S. manufacturing showed signs of a slowdown in September as the Institute for Supply Management's monthly PMI report edged lower to 50.2%, down 0.9 percentage point from August. The September PMI was the lowest reading since May 2013. A reading of 50% or more indicates growth.

The September report makes it "clear that the strong dollar, reduced crude oil prices and soft global demand have taken their toll on production and overall sentiment," said Chad Moutray, chief economist for the National Association of Manufacturers.

The PMI's individual indices were generally lower in September. The new orders index fell 1.6 percentage points to 50.1%, while the production index fell 1.8 percentage points to 51.8. The employment index dropped to 50.5% in September from August's 51.2% reading. The new export orders index held steady at 46.5%, continuing in negative territory from August.

Calling the report a "clear sign of further weakening in the U.S. manufacturing sector," Cliff Waldman, director of economic studies for the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation, said the "sharp fall of 5 percentage points in the backlog of orders, to 41.5%, a number that is deep in contraction territory, suggests that there is little pressure on the production schedule and thus manufacturing output gains are likely to be weak over the near-term."

Of the 18 manufacturing industries included in the report, seven reported growth in September, led by the printing and textile mills.

Comments from supply chain professionals reflected a mixed outlook with particular concern about the global economy.

"North American business steady. International business trending bearish," said one chemical industry professional, while a transportation equipment manager observed, "Overall business is slowing. Consumers are nervous. Not sure what is coming next."

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