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Home » U.S. Manufacturing Gauge Pulls Back on Slower Orders, Production

U.S. Manufacturing Gauge Pulls Back on Slower Orders, Production

U.S. Manufacturing
A worker manufactures footballs at the Wilson Sporting Goods facility in Ada, Ohio. Photo: Bloomberg.
October 4, 2020
Bloomberg

U.S. manufacturing expanded in September by less than forecast as new orders pulled back from a 16-year high and production softened.

A gauge of factory activity decreased to 55.4 from 56 a month earlier that was the strongest since late 2018, according to data from the Institute for Supply Management. Readings above 50 indicate manufacturing is expanding, and September’s figure was weaker than the 56.5 median projection of economists in a Bloomberg survey.

Though softer than expected, the manufacturing gauge is still at its third-highest level since 2018. The COVID-19 pandemic and associated business closures crippled factory production, but as the economy has opened more broadly, the sector has recovered rapidly. However, as the initial wave of pent-up demand has tempered, so has the pace of growth for the nation’s producers.

Fourteen of the 18 manufacturing industries tracked by the ISM reported growth in September, led by paper products, wood products, food and furniture. Four industries, including apparel and petroleum, contracted.

“For the better part of the month of September, it’s been a very strong period of growth for manufacturing,” Timothy Fiore, chairman of the ISM Business Survey Committee, said on a call with reporters. “There’s not a single thing that I can see in this report that would cause me to be overly concerned about the future.”

Fiore said in an interview that “going forward, we’re looking at a 52 to 54. That’s the kind of number we should be expecting. I still continue to be surprised by some of the performance coming out of the manufacturing sector.”

A measure of new orders fell 7.4 points to 60.2, the index’s first decline since April. Orders may settle into a more sustainable pace as the group’s measure of customer inventories showed the fastest rate of contraction in more than a decade. ISM’s gauge of production dropped 2.3 points to 61.

The measure of inventories at factories increased to 47.1, showing stockpiles were decreasing at a slower pace. At the same time, a gauge of customer inventories slipped to 37.9, indicating an even faster rate of decline that could translate into further production gains in coming months.

The gauge of factory employment improved to 49.6, moving closer to stabilization though still marking the 14th month of contraction. Some 19.4% of manufacturers said employment was higher in September, the largest share since June 2019. 

The ISM’s measure of exports increased 1 point to 54.3, highlighting little more than a gradual pickup in overseas demand.

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