US Manufacturing Activity Contracts for a Fifth Straight Month
Manufacturing Sector Slowdown Continues
Key Points
- US Manufacturing Purchasing Managers' Index (PMI) falls to 47.4 in September, the lowest since June 2020.
- New orders, production, and employment sub-indexes all decline, indicating a broad-based slowdown.
- Factors contributing to the downturn include rising interest rates, supply chain disruptions, and geopolitical uncertainty.
PMI Slumps to 47.4
The ISM Manufacturing PMI, a widely followed measure of manufacturing activity, registered 47.4 in September, down from 52.8 in August. This marks the fifth consecutive month of contraction, signaling a deepening slowdown in the manufacturing sector.
Slowdown Across Sub-Indices
All five major sub-indexes of the PMI declined in September:
- New orders dropped 2.1 points to 47.1.
- Production fell 1.9 points to 47.3.
- Employment declined 1.4 points to 48.7.
- Supplier deliveries improved slightly, but remained slow at 49.9.
- Inventories rose 1.6 points to 50.9.
Causes of the Slowdown
Several factors are contributing to the manufacturing slowdown:
- Rising Interest Rates: The Federal Reserve has aggressively raised interest rates to combat inflation, making it more expensive for businesses to borrow and invest.
- Supply Chain Disruptions: Ongoing supply chain issues due to the pandemic and geopolitical tensions continue to hamper production.
- Geopolitical Uncertainty: The war in Ukraine and tensions between the US and China have created uncertainty, which is weighing on business confidence.
Outlook for the Future
The Institute for Supply Management (ISM) states that the manufacturing sector is "in a contractionary mode." While the PMI is expected to improve in the coming months, it is unlikely to return to expansionary territory until economic conditions improve.
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