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Manufacturing Contraction Deepens

Hillary Cargo
By Hillary Cargo Senior Editor, SME Media

Economic activity in the manufacturing sector contracted for the 12th consecutive month in October. According to the latest Manufacturing ISM Report On Business, the Manufacturing PMI registered 46.7%, down 2.3 percentage points from the previous month. This contraction followed a brief period of weak expansion and preceded nine months of contraction, indicating a return to economic contraction after a 30-month expansion phase. Anything below 50% indicates contraction.

The report, issued by Timothy R. Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee, highlighted several key findings. The New Orders Index stood at 45.5%, and the Production Index registered 50.4%, down 3.7 and 2.1 percentage points, respectively, from the September figures. The Employment Index also decreased to 46.8%, showing a 4.4 percentage point decline from the previous month.

While the Supplier Deliveries Index indicated faster deliveries at 47.7%, the Prices Index showed an increase at 45.1%. The Backlog of Orders Index registered 42.2%, and the Inventories Index decreased to 43.3%. Furthermore, the New Export Orders Index increased to 49.4%, while the Imports Index remained in contraction territory at 47.9%.

The report emphasized the prevalent labor shortages in the construction industry, contributing to housing deficits in many countries. The construction sector is struggling to meet the demand for new homes and needs to improve the environmental performance and efficiency of buildings. Sustainable construction practices, including reducing material wastage and eliminating waste, are considered crucial for addressing these concerns.

Despite the challenges, the report indicated that some industries, particularly Food, Beverage & Tobacco Products, are experiencing growth in October. However, 13 industries, including Printing & Related Support Activities, Textile Mills, and Transportation Equipment, reported contraction.

Fiore explained that companies continue to manage outputs as order softness persists, impacting the demand for manufacturing workers. While inputs and supplier deliveries accommodate future demand growth, there are concerns regarding inflation, gas, and oil pricing in the construction industry.

This latest ISM report shows the manufacturing sector's struggles and its need to address ongoing labor shortages and other challenges to return to growth.

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