The September ISM manufacturing index registered 50.9, falling short of expectations of a 52.0 print. The index fell 1.9 percentage points from the August’s reading of 52.8.
New orders fell by 4.2 percentage points to 47.1, while new export orders fell 1.6 percentage points to 47.8.
The backlog of orders sub-index came in at 50.9, falling 2.1 percentage points from August’s 53.0 print.
The production index rose 0.2 percentage points to 50.6 while the employment index sank 5.5 percentage points to 48.7.
The supplier deliveries sub-index fell to 52.4 from 55.1 in August. Supplier delivery times expanded at their slowest rate since January 2020.
Nine of 18 manufacturing industries reported growth in September. Growth was led by Nonmetallic Mineral Products; Machinery; Plastics & Rubber Products; Miscellaneous Manufacturing; Apparel, Leather & Allied Products; and Transportation Equipment.
Key Implications
The ISM manufacturing index eked out another gain in September, registering slightly above the 50-reading that is the cut-off for growth. The details of the report were decidedly negative with new orders, new export orders and employment all sinking. Moreover, only half of the 18 industries reported growth in the month.
In a bit of good news, supply side disruptions continue to ease, mitigating one the key inflationary impulses from the past year. However, the improvements are coming as a byproduct of softening demand, as higher interest rates work their way through the economy.
Despite better supply conditions, the growth outlook is decidedly frail. Recent signals by the Fed that even higher interest rates will be needed to quell inflation don’t bode well for rate-sensitive durable good purchases. Looking forward, the Fed’s fight against inflation will continue to work to cool demand and form a key headwind for the manufacturing sector.
