ISM Report: Manufacturing Activity Continues Contraction for Eighth Consecutive Month in October

The ISM (Institute of Supply Management) Manufacturing PMI fell to 48.7% in October, 0.4 points lower than the September figure of 49.1%. October’s reading indicates contraction at a faster rate and marks the eighth consecutive month of contraction for the manufacturing sector.

"Of the five subindexes that directly factor into the Manufacturing PMI, one (supplier deliveries) is in expansion territory, one fewer than in September,” says Susan Spence, chair of the ISM’s manufacturing business survey committee. Anything lower than 50% represents contraction.

The production index fell from expansion in September into contraction territory last month, losing 2.8 points for an October reading of 48.2%.

The new orders and employment indexes grew from the previous month but remained in contraction, registering 49.4% and 46.0%, respectively.

“All of the four demand indicators (new orders, new export orders, backlog of orders and customers’ inventories indexes) improved, although they are still in contraction territory,” says Spence.

Six manufacturing industries reported growth in October:

• Primary Metals
• Food, Beverage & Tobacco Products
• Transportation Equipment
• Plastics & Rubber Products
• Fabricated Metal Products
• Nonmetallic Mineral Products

“Of the six largest manufacturing industries, only two (food, beverage & tobacco products and transportation equipment) expanded in October,” says Spence.

The comments of the survey showcase respondent concerns regarding strained business conditions, low sales and tariffs.

“Tariffs continue to be a large impact to our business. The products we import are not readily manufactured in the U.S., so attempts to reshore have been unsuccessful. Overall, prices on all products have gone up, some significantly. We are trying to keep up with the wild fluctuations and pass along what costs we can to our customers,” writes a respondent in the machinery sector.

Another respondent in the chemical products sector writes, “Business continues to remain difficult, as customers are cancelling and reducing orders due to uncertainty in the global economic environment and regarding the ever-changing tariff landscape.”