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Economy in Brief

U.S. ISM Manufacturing PMI Falls in October; Lowest Since May '20
by Winnie Tapasanun  November 1, 2022

• 50.2 in Oct. vs. 50.9 in Sept.; the fourth m/m decline in PMI in five months.

• New orders contract for the fourth time in five months.

• Employment rebounds to 50 (the contraction-expansion dividing line) from a contraction-level 48.7.

• Production rises to a three-month-high 52.3, indicating expansions for 29 straight months.

• Prices decrease w/ the prices index falling to 46.6, the lowest reading since May '20.

The ISM U.S. manufacturing PMI declined to 50.2 in October from 50.9 in September and 52.8 in August, according to the Institute for Supply Management, indicating the overall economy expanded in October for the 29th consecutive month but at a slightly slower pace. The October reading, below the peak of 63.7 in March 2021 and 60.8 in October 2021, was the lowest level since May 2020. The Action Economics Forecast Survey expected 49.8 for October.

The new orders index rebounded to a still-contraction-level 49.2 in October from 47.1 in September, registering its fourth contraction in five months. The index was noticeably down from 60.6 last October and a high of 67.4 in December 2020. An increased 18.3% (NSA) of respondents reported higher new orders in October vs. 16.0% in September, but a higher 25.3% reported a decline vs. September's 21.2%. The production index increased to a three-month-high 52.3 this month from 50.6 in September, showing expansions for 29 successive months. However, it remained below 59.0 last October and a high of 66.4 in March 2021. The inventory index fell to 52.5 in October, the lowest reading since April, from 55.5 in September and 56.4 last October.

The employment index recovered to 50.0 in October from a contraction-level 48.7 in September, but it was slightly down from 52.1 last October. A lessened 16.0% (NSA) of respondents reported higher employment in October vs. 17.5% in September while 15.1% reported less hiring vs. September's 22.2%. The supplier deliveries index fell to 46.8 in October, the lowest reading since March 2009, from 52.4 in September and 75.6 last October. About twelve percent (NSA) of respondents reported slower product delivery speeds while an increased 18.1% reported faster delivery speeds.

The prices index fell to 46.6 (NSA) in October from 51.7 in September and 85.7 last October, indicating raw materials prices dropped for the first time since May 2020's 40.8 reading. Nearly twenty percent (NSA) of respondents reported higher prices in October vs. 31.4% in September while 26.5% reported price declines vs. September's 28.1%.

In other ISM series, the new export orders index declined to 46.5 in October from 47.8 in September, registering the third straight contraction to the lowest level since May 2020's 39.5. It was also down from its recent high of 57.1 in February and 54.6 last October. The imports index was at 50.8 in October, slightly down from 52.6 in September but up from a low of 48.7 in May and 49.1 last October. The orders backlog index dropped to a contraction-level 45.3 in October, the lowest level since June 2020, from 50.9 in September and 63.6 last October; it was also below a high of 70.6 in May 2021.

The ISM figures are based on responses from over 400 manufacturing purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's USECON database; further detail is found in the SURVEYS database. The expectations number is available in Haver's AS1REPNA database.

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