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United States PMI September 2019

United States: ISM manufacturing index slips further into contractionary territory in September

The Institute for Supply Management (ISM) manufacturing index fell to 47.8 in September from 49.1 in August, representing the lowest reading since June 2009 and undershooting market expectations of a neutral print. Consequently, the index remained below the 50-threshold that separates expansion from contraction in the sector for the second month in a row.

The sharper contraction was due to a marked decline in production, with the corresponding sub index falling to the lowest result since April 2009. Meanwhile, new orders continued to contract, albeit at a fractionally slower pace. New export orders, which have been particularly affected by the protracted U.S-China trade dispute, fell sharply. This fed through to a rapid drop in employment, and manufacturers reduced backlogs of work and inventory levels at a quicker clip amid frail demand.

On the supply side, supplier delivery times slowed in September and respondents pointed to increased difficulty in transporting products from China and in planning for road freight transit times. Meanwhile, stocks of inputs contracted at a faster rate and input cost inflation fell due to lower raw material prices, but at a softer pace than in August.

Comments from the panel suggest manufacturers continue to be concerned over trade and are less optimistic about near-term growth prospects. One respondent noted that “[the] general market is slowing even more than a normal fourth-quarter slowdown”, while another panelist commented that “the tariffs have caused much confusion in the industry.”

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