Manufacturing again contracts in September
Economic activity in the manufacturing sector contracted in September for the sixth consecutive month and the 22nd time in the last 23 months, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.
The report was issued by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee:
“The Manufacturing PMI registered 47.2% in September, matching the figure recorded in August. The overall economy continued in expansion for the 53rd month after one month of contraction in April 2020. (A Manufacturing PMI above 42.5%, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index remained in contraction territory, registering 46.1%, 1.5 percentage points higher than the 44.6% recorded in August. The September reading of the Production Index (49.8 percent) is 5 percentage points higher than August’s figure of 44.8 %. The Prices Index went into contraction (or ‘decreasing’) territory for the first time this year, registering 48.3%, down 5.7 percentage points compared to the reading of 54% in August. The Backlog of Orders Index registered 44.1%, up 0.5 percentage point compared to the 43.6% recorded in August. The Employment Index registered 43.9%, down 2.1 percentage points from August’s figure of 46%.
“The Supplier Deliveries Index indicated slowing deliveries, registering 52.2%, 1.7 percentage points higher than the 50.5% recorded in August. (Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 43.9%, down 6.4 percentage points compared to August’s reading of 50.3 %.
“The New Export Orders Index reading of 45.3% is 3.3 percentage points lower than the 48.6% registered in August. The Imports Index remained in contraction territory in September, registering 48.3%, 1.3 percentage points lower than the 49.6% reported in August.”
Fiore continues, “U.S. manufacturing activity contracted again in September, and at the same rate compared to last month. Demand continues to be weak, output declined, and inputs stayed accommodative. Demand slowing was reflected by the (1) New Orders Index remaining in contraction territory, (2) New Export Orders Index contracting at a faster rate, (3) Backlog of Orders Index staying in strong contraction territory, and (4) Customers’ Inventories Index indicating customers’ inventories were “about right.” (For more, see the Customers’ Inventories Index summary section.) Output (measured by the Production and Employment indexes) continued in contraction with mixed results: Employment shrunk at a faster rate while production approached expansion, with levels on par compared to August. Panelists cited continuing efforts by their companies to right-size workforces to levels consistent with projected demand. Inputs — defined as supplier deliveries, inventories, prices and imports — generally continued to accommodate future demand growth, with inventories returning to low levels and suppliers showing some difficulty in meeting customer needs.
“Demand remains subdued, as companies showed an unwillingness to invest in capital and inventory due to federal monetary policy — which the U.S. Federal Reserve addressed by the time of this report — and election uncertainty. Production execution stabilized in September. Suppliers continue to have capacity, with lead times improving and shortages reappearing. Seventy-seven percent of manufacturing gross domestic product (GDP) contracted in September, up from 65% in August. The share of manufacturing sector GDP registering a composite PMI calculation at or below 45% (a good barometer of overall manufacturing weakness) was 41% in September, an 8-percentage point increase compared to the 33% reported in August. Only one of the six largest manufacturing industries — Food, Beverage & Tobacco Products — expanded in September, compared to two in August,” says Fiore.
The five manufacturing industries reporting growth in September are: Petroleum & Coal Products; Food, Beverage & Tobacco Products; Textile Mills; Furniture & Related Products; and Miscellaneous Manufacturing. The 13 industries reporting contraction in September — in the following order — are: Printing & Related Support Activities; Plastics & Rubber Products; Wood Products; Apparel, Leather & Allied Products; Primary Metals; Transportation Equipment; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Paper Products; Machinery; Chemical Products; Fabricated Metal Products; and Computer & Electronic Products.
WHAT RESPONDENTS ARE SAYING
• “North America demand has started to weaken. Asian demand is slightly higher but shows signs of weakness in future months. Comments tied to automotive builds.” [Chemical Products]
• “Global demand continues to remain soft. Fourth-quarter forecasts have been further reduced, with several new programs shifted from 2024 to 2025. Manpower, working capital and supplies are being flexed down in response. The previously anticipated shift from internal combustion engine to electric vehicle (EV) technology has been pushed out due to market response. Long-range plans are being adjusted to incorporate traditional products for longer, while new EV product offerings are being planned for slower rollouts.” [Transportation Equipment]
• “The second half of 2024 is trending upward enough to more than compensate for the year-over-year losses we experienced in the first half. We are anticipating a record sales volume for 2024.” [Food, Beverage & Tobacco Products]
• “The strategy of customer push-outs last year enabled those customers to adapt to the market. Now, while most companies are seeing a slowdown, we are seeing solid growth. The general slowdown in the economy is allowing for prices to continue to stabilize.” [Computer & Electronic Products]
• “A continuing low order rate is resulting in ongoing manufacturing adjustments to balance output with demand.” [Machinery]
• “The fourth quarter is slower than anticipated. We won’t realize the effect of interest rate adjustments with new project starts until the first quarter of 2025.” [Fabricated Metal Products]
• “Business is flat. Waiting for interest rates to drop and the election outcome in November before we confirm our 2025 plans. Currently planning on a flat 2025.” [Furniture & Related Products]
• “Our sales continue to be flat. Our customers are telling us that although our products perform very well, they are forced to seek lower-cost components to maintain their sales.” [Textile Mills]
• “Sales have slowed this quarter compared to the same time period last year. Adjusting production accordingly.” [Miscellaneous Manufacturing]
• “Still hiring to fill vacant positions in production/management. Not adding new jobs. Automotive original equipment manufacturers (OEMs) are starting to slow or cancel orders. The pace is slowing.” [Primary Metals]
INDUSTRIAL SUPPLY MAGAZINE
The September/October issue of Industrial Supply magazine features an in-depth cover story about Kurz Industrial Solutions. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Hockett, as well as interviews with numerous product and distribution industry experts.
