US manufacturing sector activity slows more sharply than expected in September, ISM says
By Alexander Bueso
Date: Monday 03 Oct 2022
(Sharecast News) - Manufacturing sector activity in the US slowed last month amid ongoing supply chain issues and some indications of slower demand, according to the results of a closely followed survey.
The Institute for Supply Management's factory sector Purchasing Managers' Index slipped from a reading of 52.8 for August to 50.9 in September (consensus: 52.4).
A key gauge tracking new orders fell from 51.3 to 47.1, that for employment dropped from 54.2 to 48.7 and another linked to the prices paid by companies dipped from 52.5 to 51.7.
For both the headline index and all the subindices, the 50 point level marks the threshold between expansion and contraction.
Subindices for order backlogs, new export orders and supplier deliveries all declined while those for production and inventories, among others, rose.
A purchasing manager from the Computer and Electronic Products sector reported supply chain issues for all electronic components, another from the Machinery space said that supply chain constraints "on many items are still an issue" while a manager in Chemical Products cited growing concerns of a global economic slowdown.
Commenting on the outlook for US manufacturing, Oren Klachkin and Kathy Bostjancic at Oxford Economics predicted that it would lose further steam in the months ahead as a result of slackening demand for goods and weakness in business investment.
Yet while it would remain elevated, amid supply chain challenges, they believed that goods inflation had peaked.
"We look for nondurables manufacturing activity to suffer greater losses than durables in the upcoming recession, which we think will occur in the first half of 2023," they said in a research note sent to clients.
"Given the economic environment, we highlight that the recession could start sooner and be deeper than our baseline forecast expects."
For his part, Ian Shepherdson, chief economist at Pantheon Macroeconomics, labelled the survey results "disappointing", pointing out that regional survey results had pointed to a "modest" rise.
However, those regional surveys were limited in their coverage as they said nothing of what was occuring west of the Rocky mountains, where manufacturing was still being disrupted by restrictions in China.
"In short, manufacturing is struggling, though it is not rolling over and we would be surprised to see large further declines in the ISM.
"That said, the combination of recession in Europe, the very strong dollar, and China's zero-Covid distortions suggest that most of the risk is to the downside."
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