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Manufacturing Contracts for 3rd Straight Month While Showing Some Improvement

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing contracted for a third consecutive month in October but showed some signs of improvement, the Institute for Supply Management said today in a monthly report.

The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, was 48.3 percent last month. That was up from 47.8 percent in September, which was the lowest PMI since June 2009.

“We have rebounded a little bit,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.

The index is considered a leading economic indicator, providing a barometer for where manufacturing is heading. The ISM report is based on a survey of 350 purchasing and supply executives. A reading above 50 percent indicates a growing manufacturing economy. Below 50 percent indicates economic contraction. The PMI has averaged 52.7 percent the past 12 months.

While still in contraction, portions of the ISM report were better in October compared with the previous month.

Five of 18 industries reported economic growth in October, ISM said. In September, only three industries registered expansion. In October, the expanding industries included furniture and wood products. Twelve industries reported economic contraction.

The group’s New Orders Index also performed better in October than the month before. The October level was 49.1 percent, up from September’s 47.3 percent. Five industries had increases in orders while 10 had declines.

ISM’s Employment Index also improved to 47.7 percent from 46.3 percent the month before. Five of the 18 industries reported job gains, nine reported job cuts.

The institute’s Production Index slipped to 46.2 percent in October from 47.3 percent in September. Six industries said output increased while 11 reported production cuts.

GM, Boeing

One industry that’s part of the PMI has contracted significantly, Fiore said.

Transportation equipment faced two major challenges in October – the United Auto Workers strike at General Motors Co. and the continuing grounding of Boeing Co.’s 737 Max.

The 40-day GM walkout ended late in the month. The automaker is resuming production at factories that had been idled by the walkout.

 However, it’s uncertain when regulators will permit the 737 Max to return to the skies.

The aircraft is one of Boeing’s most important products. It was grounded following two crashes that killed 346 people. Boeing is attempting to make a software fix for the 737 Max but the company has said those efforts are taking longer than it originally expected.

CEO Dennis Muilenburg was grilled by two Congressional committees this week concerning how he and the company responded to problems with the aircraft.

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