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ISM Manufacturing Index continues to contract

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The October ISM Manufacturing Index continued to contract in October, though it improved to 48.3 from September’s reading of 47.8, implying a modestly slower pace of contraction in domestic manufacturing sentiment.

The forward-looking new orders index improved to 49.1 from 47.3. Both are in line with our RSM Manufacturing Outlook Index, which stands at .812 standard deviations below neutral and implies that the domestic manufacturing sector remains in recession.

In our estimation, the lagging impact of monetary policy in the United States and the strong probability of accommodative policy out of Europe, China and Japan in early 2020 will set the stage for a modest rebound in global manufacturing. We expect the direction of domestic manufacturing to remain flat to modestly negative going forward into the end of 2019 and early 2020.

A look at the data and ISM commentary implies that global trade remains the most significant cross-industry issue. Food, beverage and tobacco products are the strongest industries, while and transportation and equipment are the weakest. Of the 18 industries only five report growth, with 12 industries reporting contraction and one showing no change, which underscores our estimation that the domestic manufacturing ecosystem remains in recession.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel and the UCLA Anderson School of Management's Board of Directors, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia. In December 2023, Brusuelas and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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