U.S. manufacturing activity expanded in October, but at a slower rate than reported in September according to new data released this morning by the Institute for Supply Management.
ISM’s index of U.S. manufacturing activity, based on a survey of U.S. supply executives, slowed to 58.7 in October, 2.1% shy of September’s historic 60.8 – its highest reading in 13 years.
Any reading over 50 indicates expansion, according to the ISM’s metrics. October marks the 14th consecutive month of growth in the manufacturing sector, and the 101st month of growth for the U.S. economy overall.
Overall, the U.S. manufacturing sector and the economy overall has experienced strong growth, corresponding with multiple local Fed reports, such as growth in New York manufacturing activity reaching a new high, and a 3.1% rise in GDP recorded in the second quarter.
IndustryNet has also reported sustained growth in multiple sectors such as lumber and wood products and chemical processing. Construction spending continues to rebound, which has helped to boost jobs in the roofing industry. Manufactures in numerous states such as Wisconsin, Colorado, and Indiana have reported significant growth to IndustryNet over the past year.
Cooler readings blamed on Harvey, Irma
Declines were recorded across a broad range of categories, with new orders, production, inventories, and supplier deliveries easing back. Many executives surveyed placed blame on Hurricanes Harvey and Irma, suggesting October’s softer reading may just be a temporary setback.
According to ISM’s survey of supply executives, sixteen of eighteen industries reported growth, with paper products, nonmetallic mineral products; machinery; transportation equipment; and wood products leading growth.
One executive in the nonmetallic mineral products sector noted “Our plants are sold out for 2017—we can’t take any more orders,” while another executive in the transportation equipment sector said: “Business continues to be better than expected.”
Other executives pointed to disruptions caused by the recent storms, with one executive in the electronics industry reporting “Hurricanes have caused shortages in the resin market, resulting in price increases, inventory constraints and increased lead times.”
Some pointed to increased business due to recovery efforts, suggesting future readings may increase for some manufacturing sub-sectors.
New orders ease
The new orders index inched down 1.2 percentage points from September’s impressive 63.4 reading. Despite the slower rate of growth, new orders continue to be strong, with the ISM noting “A New Orders Index above 52.3 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders.
Twelve out of eighteen industries reported an uptick in new orders, with paper products; apparel, leather & allied products; wood products; and machinery leading increases.
Just three sectors: printing & related support activities; plastics & rubber products; and fabricated metal products reported a decrease in new orders.
Inventories slip
The most significant change in October’s ISM report was the 4.5% decrease in raw material inventories, which the ISM stated “reflects the difficulty of the supply chain to deliver materials and services meeting production schedules.”
The ISM’s Inventories Index registered 48% in October from a reading of 52.5% in September.
Higher inventories were reported in just six sectors: nonmetallic mineral products; machinery; furniture & related products; transportation equipment; miscellaneous manufacturing; and primary metals.
Lower inventories were reported in 11 categories, with apparel, leather, & allied products; textiles; and petroleum/coal reporting the largest inventory shortages.
Supplier deliveries, production inch down, but still expanding.
The next sharpest decline was recorded in supplier deliveries, which fell by 3 percentage points to 61.4. Slower delivery times were reported in plastics & rubber products; machinery; paper products; petroleum & coal products; and electrical equipment.
Furniture & related products and miscellaneous manufacturing reported faster delivery times.
The ISM’s production index declined 1.2% -- a small setback considering the reading is well into expansion territory at 61 percent in October. This marks the 14th consecutive month industrial production has expanded in the U.S.
Paper products; apparel, leather & allied products, wood products; and nonmetallic mineral products are among the 15 industries reporting higher production in October.
Just one sector, primary metals, reported a decrease in production, while all other sectors remained the same.
Overall, the ISM’s reading was positive, despite setbacks caused primarily by weather-related supply disruptions. Most sectors remained in expansion territory for a number of key metrics, suggesting U.S. manufacturing activity should continue to post strong gains in the coming months.
The Manufacturing ISM® Report On Business® is based on data compiled from purchasing and supply executives nationwide.
IndustryNet is a one-stop industrial marketplace, providing information on 400,000 U.S. manufacturers as well as suppliers of 10,000-plus industrial products and services.
