HomeContributorsFundamental AnalysisISM Shows U.S. Manufacturing Sector Contraction Accelerated in October

ISM Shows U.S. Manufacturing Sector Contraction Accelerated in October

The October ISM Manufacturing Index fell to 46.7, from 49.0 in September, falling short of the 49.0 markets had expected. This month’s contraction was broad based with only two industries reporting growth.

The new orders sub-index pulled back 3.7 percentage points (pp) to 45.5, while new export orders remained in contraction territory (49.4) despite a month-on-month improvement. Softening demand conditions come as the employment index signaled a contraction (46.8) for the fourth time in five months.

Production was relatively unchanged from September as the index slipped 2.1 pp to 50.4. With falling new orders and stable production, the backlog of orders sub-index registered 42.2 – falling for the 13th month in a row.

The prices paid sub-index (45.1) continues to reflect softening raw materials prices.

Key Implications

October’s manufacturing sector report gives back some of the upside surprises from September’s release, falling back to the low ebb earlier this year. Looking at the details, broad-based weakness in the manufacturing sector persists as new orders contract, while employment growth has stalled out.

The sharp reversal in this month’s report reflects a sector that continues to struggle to regain its footing after a deluge of Fed rate hikes. Amid falling demand, supply conditions have loosened considerably, and sagging raw materials prices are easing cost pressures. These factors should help mitigate the upside to consumer goods prices inflation.

TD Bank Financial Group
TD Bank Financial Grouphttp://www.td.com/economics/
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

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