Manufacturing activity across the country remained on solid footing in September, but the strength exhibited earlier this year seems to be waning.
The Institute for Supply Management released its widely followed Report on Business Monday, saying economic activity within manufacturing grew in September for the 40th straight month, with the overall PMI index coming in at 52.9 percent, down from 54.5 percent in August.
“The manufacturing sector continues on a trend of slowing growth in September,” said Norbert Ore, chair of the ISM’s Manufacturing Business Survey Committee. “While there was little change in new orders and production when compared to August, significant slowing took place in employment and inventories. It’s apparent that manufacturing is losing momentum and feeling the effects of higher interest rates and a weaker housing market.”
New orders came in at 54.2 percent in September, the same as in August, while the production index came in at 56.2 percent, down 0.5 percentage point from August.
The employment barometer registered a 4.6 percentage point decrease, to 49.4 percent. The falloff comes on the heels of two straight months of growth in employment. Five industries reported growth in employment during the month: Petroleum & Coal Products; Nonmetallic Mineral Products; Paper Products; Furniture & Related Products; and Miscellaneous Manufacturing.
Manufacturers’ inventories fell to 46.4 percent from 50.2 percent, while customers’ inventories rose to 49 percent from 46 percent. Te prices paid component dropped to 61 from 73 posted in August.“The September decline in the ISM index confirms a mid-cycle correction in the pace of growth in the industrial sector,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. “After scrambling to add inventories earlier this year amid supply disruptions, inventories are now being pared back — particularly in the motor vehicle sector. Housing construction activity is declining and the growth in equipment demand is probably slowing from an unsustainably fast pace."
Meckstroth said September's significant decline in manufacturing backlogs suggests the pace of growth in manufacturing will decelerate in lockstep with the general economy.