By Xavier Fontdegloria
Growth in the U.S. manufacturing sector slowed in September to its lowest level in more than two years, continuing its downward trend of recent months as slowing demand for goods weakened factory activity.
The Institute for Supply Management said on Monday its U.S. manufacturing activity index fell to 50.9 in September from 52.8 in August, the lowest level since May 2020, when the economy sagged. was shut down amid the first wave of the Covid-19 pandemic.
Economists polled by The Wall Street Journal had expected the index to come in at 52.0.
The index, which is based on a survey of manufacturers across the United States, suggests factory activity barely rose during the month, with the reading just above the 50.0 threshold that indicates growth.
The index reflects companies adjusting to a potential decline in future demand after four consecutive months of slowing new order rates, said Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee.
Growth in U.S. manufacturing activity is slowing as a slowing global economy, tighter monetary policy and an abandonment of goods-related spending hit the sector.
The drop in the overall ISM index was driven by significant declines in new orders and employment components.
The new orders index slipped back into contraction territory at 47.1 from 51.3 the previous month, a sign of weakening demand for goods.
“Concerns about the global economic slowdown are growing and [we are] some customers are withdrawing orders,” said a respondent from the chemicals sector.
The employment index fell to 48.7 from 54.2 in August, signaling that companies surveyed on average cut jobs. However, respondents’ comments do not mention any large-scale layoffs, Fiore said.
“This indicates that businesses are confident about near-term demand, so the main objectives are to manage mid-term workforces and supply chain inventory,” he said.
The production index increased slightly from 50.4 to 50.6, suggesting marginal growth in production.
Supply chains continued to normalize in September, according to the survey. The supplier deliveries index fell to 52.5 from 55.1, posting the lowest level since December 2019.
Price growth also continued to slow, a sign of easing inflationary pressures. The price index fell slightly to 51.7 from 52.5, the lowest since June 2020.
“Raw materials are increasingly available and prices for some raw materials are falling,” said a plastics and rubber products industry respondent.
Write to Xavier Fontdegloria at [email protected]