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Manufacturing Expansion Eases in September

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing economic expansion eased in September while remaining at strong levels overall, the Institute for Supply Management said today.

The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, registered at 55.4 percent last month. That slipped from 56 percent in August.

New orders and production slowed, according to a monthly report. Employment improved, though remained in negative territory.

Still, ISM said the results indicate that manufacturing expansion still is cruising.

“This report is a very positive report,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.

The index is based on a survey of 350 purchasing and supply executives across 18 industries. An index level above 50 percent indicates expansion while below 50 percent shows economic contraction. The PMI is considered a leading economic indicator and a barometer of where the economy is heading.

ISM said 14 of the 18 industries experienced expansion, including paper products, fabricated metal products, miscellaneous manufacturing, machinery and transportation equipment. Four sectors reported contraction, including petroleum and coal products and primary metals.

The PMI has been in positive territory four straight months as manufacturing recovered from the novel coronavirus (COVID-19). The index has averaged 49.8 percent the past 12 months. It reached a low of 41.5 percent in April at the peak of COVID-19’s impact on manufacturing. August’s 56 percent level was the high during the past 12 months.

ISM’s New Orders index fell to 60.2 percent last month from 67.6 percent in August. Twelve of 18 industries reported an increase in orders. The category is important because orders now lead to production later.

The group’s Production index slipped to 61 percent in September, down from 63.3 percent the month before. Fourteen industries had gains in output, with three reporting production declines.

The institute’s Employment index improved to 49.6 percent last month from 46.4 percent in August.

Fiore said respondents to ISM’s survey indicated manufacturers are looking to add jobs.

“We’ve got people looking to add people,” Fiore said.

At the same time, the overall U.S. economy is facing a new round of job cuts, including layoffs in the airlines and leisure industries. The new layoffs may be “a bit of a headwind on the manufacturing community going forward,” Fiore said.

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