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First Cut: ISM Manufacturing Index softens for sixth month in a row, below neutral for a second month

The September ISM Manufacturing Index fell to 47.8 from 49.1 in August and was its lowest since 45.8 in June 2009, just at the end of the recession. The index has now declined for six straight months and been below the 50-mark of neutral for the past two. There is little doubt that the factory sector is on the cusp of recessionary conditions and any further softening could tip the scale. Comments from survey respondents indicate that new orders have been adversely affected by unsettled trade and tariff policy that have added to costs and delays along the supply chain.

Four of the five components were in contraction in September. Delivery times was little changed at 51.1 in September after 51.4 in August and was only narrowly positive. New orders were essentially unchanged at 47.3 from 47.2 in the prior month when it was the lowest since 49.0 in May 2009. Production slowed to 47.3 after 49.5 and was its lowest level since 42.7 in May 2009.  Employment in September was down to 46.3 from 47.4 and was the lowest since 45.9 in January 2016. Inventories fell 3 points to 46.9 and were the lowest since 45.0 in May 2016. There are a lot of echos of recessionary levels in these numbers, or at least that the robust performance of 2017-2018 has decisively ended.

Export orders fell to 41.0 in September from 43.3 and reflected sluggish conditions in the global economy as well as trade bottlenecks. This was the lowest since 39.0 in March 2009.  Imports were up to 48.1 after 46.0, possibly due to the necessity to get goods into stock before supplies ran out and/or prices went up.


The prices paid index rose to 49.7 in September from 46.0 in August and was the highest in five months. Some of this will be from higher energy costs, but some is also for other commodities in short supply. At the moment, input costs are not driving prices higher, but may start to do so again if energy prices see a negative impact from developments in the Middle East and/or shortage of materials are more acute.


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