The US ISM manufacturing index for October released on Tuesday (1st) was at 50.2, slightly above the 50 forecast by the market, but not as good as 50.9 in September, a new low in nearly two and a half years, and growth was close to complete stagnation The monthly decline and the new orders index contracted for the fourth time in five months due to the cooling of demand for goods due to the aggressive interest rate hikes of the Federal Reserve.
At the same time, the final value of the US Manufacturing Purchasing Managers Index (PMI) in October was 50.4, the lowest final value since June 2020, but it was higher than expected and the starting value of 49.9, returning to line 50. of prosperity and higher decline. With the Federal Reserve likely to continue to raise aggressive interest rates, both manufacturing data on Tuesday showed that the US economy is sliding to the brink of recession.
US ISM Production Sub-Index for October:
- The new orders index was brought back to 49.2, the previous value was 47.1
- The production index was brought back to 52.3, the previous value was 50.6
- The employment index reported 50.0, the previous value was 48.7
- The supplier delivery index was brought back to 46.8, the previous value was 52.4
- The inventory index was at 52.5, the previous value was 55.5
- The customer inventory index was reset to 41.6, the previous value was 41.6
- The price index reported 46.6, the previous value was 51.7
- The index of outstanding orders was brought back to 45.3, the previous value was 50.9
- The export orders index was reset to 46.5, the previous value was 47.8
- The commodity import index was brought back to 50.8, the previous value was 52.6
Growth in the ISM manufacturing index fell for the fourth time in the past five months to its lowest level since May 2020, as several indicators in the report showed a complete contraction in manufacturing activity in October, including a slump in new orders and a collapse in stocks. An all-time low since mid-2020, the export orders index shrank for the third consecutive month.
Looking at the index breakdown, although the new orders index rose to 49.2 from 47.1 in September, it was still in the shrinking range, but it also showed that despite the Fed’s aggressive interest rate hikes , US consumption remained resilient.
The data is also in line with last week’s personal spending, which grew 0.6% in September, beating market expectations by 0.4%, and spending on services rose steadily. In particular, the slowdown in manufacturing growth partly reflects a shift in consumption from goods to services.
The manufacturing price index fell to 46.6 in October from 51.7 in September, the lowest level since May 2020. Since March of this year, the index has fallen by almost 50% due to the decline. of commodity prices.
The drop in the price index is good news for the Fed as other inflation data has yet to show a marked improvement, but the manufacturing sector is showing signs of slowing.
The Supplier Delivery Index tumbled to 46.8 in October from 52.4 in September, the lowest level since March 2009, indicating faster delivery times as the easing of demand allowed manufacturers to clear part of the customs clearance. accumulated goods and reduce delivery times.
The inventory index fell to 52.5 in October from 55.5 the previous month, indicating that inventories continued to rise, although the rate of growth was the slowest since April of this year.
On the employment front, the employment index rose to 50 from 48.7 the previous month, with fluctuations in the data suggesting manufacturers may be limiting hiring, struggling to find skilled workers, or a combination of both.
Timothy Fiore, director of manufacturing surveys at the Institute for Supply Management, said the October manufacturing index showed that companies are preparing for a possible decline in demand in the future.
