U.S. manufacturing PMI slips again in October, falling to 48.7%

The latest report from the Institute for Supply Management shows U.S. manufacturing continuing to contract on all major metrics. According to the ISM’s latest PMI report on U.S. industry, the overall manufacturing index fell by just under half a percentage point to 48.7 in October, as low demand dragged down production and new orders and employment continued to contract, albeit at slower rates than previously.

According to the ISM, manufacturing has now contracted for eight months in a row after growing slightly in February, despite the larger economy growing for the past 66 months.

All three of the major indexes used to calculate the main PMI fell last month, according to the November 4 report. The production index, which showed rising production last month, dipped by 2.8 points into contraction territory at 48.2. The new orders index rose by half a percentage point to 48.9, indicating slower contraction than in September, and the employment index rose by 0.7 points to 45.3. October makes the ninth month running the manufacturing employment index has shown manufacturing employment in contraction.

In a statement accompanying the report, Susan Spence, Chair of the ISM’s Manufacturing Business Survey Committee, noted that all four “demand” indicators (the new orders, new export orders, backlog of orders, and customers’ inventories indexes) improved slightly, though all four contracted in October.

On a sector-by-sector basis, two-thirds of manufacturing industries reported contraction. Six — primary metals, food and beverage, transportation equipment, plastics and rubber, fabricated metal products and nonmetallic mineral products companies — said conditions improved in October, but 12 (textiles, apparel, furniture, paper, printing, wood products, fossil fuels, electrical equipment, appliances, chemicals, machinery, miscellaneous manufacturing and computer/electronics) reported worsening conditions.

Comments from manufacturing executives responding to the ISM survey reported difficult conditions, especially uncertainty on the part of customers’ and businesses about tariffs on manufactured goods.

What people are saying

“In October, U.S. manufacturing activity contracted at a faster rate, with contractions in production and inventories leading to the 0.4-percentage point decrease of the Manufacturing PMI,” said Sarah Spence, chair of the ISM’s Manufacturing Business Survey Committee. “A chain reaction of one-month index improvements started with New Orders in August and flowed to Production in September. In October, it manifested in a 1.7-percentage point increase in the Backlog of Orders Index. These short gains have not appeared to translate into sustained growth for the sector, a reflection of continuing economic uncertainty.”

“The unpredictability of the tariff situation continues to cause havoc and uncertainty on future pricing/cost,” said an anonymous computer and electronic products company executive. “But even with the tariffs, the cost to import in many cases is still more attractive than sourcing within the U.S. Challenges with tariffs on production equipment necessary for internal production makes it difficult to justify expansion of capacity.”

“Tariffs continue to be a large impact to our business. The products we import are not readily manufactured in the U.S., so attempts to reshore have been unsuccessful,” reported an anonymous machinery company executive. “Overall, prices on all products have gone up, some significantly. We are trying to keep up with the wild fluctuations and pass along what costs we can to our customers.”

“The commercial vehicle (CV) market remains depressed as customers continue to delay vehicle purchases. Uncertainty in price and transportation demand remains the center of attention,” said an anonymous transportation equipment company executive. “U.S. trade policy and reciprocal actions by China in the form of export controls on rare earths and semiconductors, as well as ocean freight carrier restrictions, have once again caused a lot of stress in supply lines. The CV industry is now bracing for the next round of tariffs focused on commercials vehicles, scheduled to begin on November 1.”