U.S. manufacturing activity remained weak in September, according to the Institute for Supply Management (ISM), though there were some signs of improvement as new orders picked up and input prices fell to their lowest level in nine months.
The ISM manufacturing PMI held steady at 47.2, unchanged from August. A reading below 50 signals contraction and September marked the sixth consecutive month in which manufacturing has shrunk, reflecting the challenges the sector faces, which accounts for 10.3% of the economy.
Although the PMI remains below the expansion threshold, it is still above the 42.5 level, which the ISM associates with overall economic growth over time.
The broader picture of the manufacturing sector has been mixed, with other key indicators, such as factory production and durable goods orders, suggesting the sector is largely stagnant rather than in sharp decline.
Recent data on gross domestic product (GDP) showed that manufacturing output grew at a 2.6% annualised rate in the second quarter, an improvement from the 0.2% growth in the first quarter of the year.
Market participants expect further gains in the coming months, supported by the Federal Reserve’s recent interest rate cuts - the first since 2020. The Fed is also expected to lower rates again in November and December.
In more encouraging news, the forward-looking new orders index rose to 46.1 in September from 44.6 in August, indicating a possible recovery in demand.
The production index also increased, reaching 49.8 from 44.8 in the previous month, just shy of the 50 level that signals expansion.
Meanwhile, cost pressures eased for manufacturers as the prices paid index dropped to 48.3, its lowest since December 2023, down from 54.0 in August.
However, a strike by members of the International Longshoremen’s Association, which started on Tuesday, could disrupt supply chains and raise input costs in the near future.
Supplier delivery times lengthened slightly, with the supplier deliveries index rising to 52.2 from 50.5, signaling slower deliveries.
On the downside, the manufacturing employment index fell further to 43.9 from 46.0, extending its contraction for a fourth consecutive month. Companies reported reducing staff levels through layoffs, attrition, and hiring freezes, which may weigh on manufacturing payrolls in September.