The October ISM manufacturing index decreased to 60.8, topping market expectations for 60.5. This marked a 0.3 percentage point decline from the September reading of 61.1.
New orders decreased by 6.9 percentage points to 59.8, while new export orders increased by 1.2 percentage points to 54.6.
The backlog of orders sub-index came in at 63.6, falling 1.2 percentage points from September’s 64.8.
The production index fell 0.1 points, but employment rose 1.8 points.
The supplier deliveries sub-index rose to 75.6 from 73.4 in September. The sub-index continues to reflect difficulties in improving delivery rates due to production issues related to the pandemic.
16 of 18 manufacturing industries reported growth in July. Growth was led by Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Electrical Equipment, Appliances & Components; and Machinery.
Key Implications
The expansion rambles on – seventeen consecutive months and counting. Manufacturing activity cooled again, but the 60.8 print is in line with the best reading from the post-Great Financial Crisis expansion. Despite tight labor conditions, the employment index has registered its second consecutive gain, a smidge of relief for employers.
The supplier delivery times sub index showed worsening conditions as lead times continue to expand. Worryingly, new orders pulled back on the month to their lowest levels since June 2020. The effects of ongoing supply chain constrictions are coming through as manufacturing output stayed relatively flat despite customer inventories holding in depleted territory (31.7).
Respondents are seeing strong demand; however, they continue to report being held back by supply chain limitations. There may be some relief on the horizon as virus cases recede into the fall and consumer spending shifts toward services. Slower consumer goods purchases should allow producers to restock inventories – providing a key source of demand into 2022.
