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Manufacturing Softens in September

Bill Koenig
By Bill Koenig Senior Editor, SME Media

The manufacturing economy softened in September and may soon shift to contraction, the Institute for Supply Management said today.

The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, slipped to 50.9 percent last month. That was down from 52.8 percent the month before.

“I think we definitely have a slowdown,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.

“It wouldn’t surprise me to see we go to (economic) contracting,” he added.

The PMI is based on a survey of manufacturing executives in 18 industries. An index reading above 50 percent indicates economic expansion. Below that mark indicates economic contraction.

The index has been in positive territory for 28 consecutive months. However, the 50.9 percent PMI for September was the lowest index reading since the economy began to recover from the COVID-19 pandemic in 2020. The PMI has averaged 56.2 percent the past 12 months.

In September, nine industries reported economic expansion, including machinery, miscellaneous manufacturing, and transportation equipment. Seven industries reported economic contraction, including furniture and fabricated metal products.

Interest rates are being raised as the Federal Reserve seeks to slow the economy to combat inflation. There are fears the Fed’s actions may lead to a recession. Fed Chairman Jerome Powell said in a speech in August businesses and households will feel pain from the anti-inflation strategy, according to a CNN report.

In manufacturing, new orders are slowing, which is affecting production, Fiore said. Manufacturers are implementing hiring freezes and not replacing workers as they leave companies, he added. The employment situation in manufacturing is a “moderate- to long-term issue,” Fiore said.

ISM’s New Orders Index fell into negative territory in September at 47.1 percent down from 51.3 percent in August. Only five of 18 industries reported a gain in orders.

The Production Index slightly improved last month, reaching 50.6 percent from 50.4 percent the month before. Eight industries reported an increase in output.

The group’s Employment Index slipped into negative territory at 48.7 percent in September. That was down from 54.2 percent in August. Six industries reported job gains, ISM said.

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