Overall demand for manufactured goods remained strong in September, keeping the sector’s sentiment growing at a fast pace.
The Institute for Supply Management’s manufacturing index came in at 54.5, little changed from 54.6 in August, while new orders rose to 55.3 from 53.7.
After months of losing confidence and struggling under the pressure of tariffs and uncertainty, the sector has bounced back strongly since the start of the year. September marked the ninth straight month of expansion.
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That said, we expect the momentum to be disrupted by rising interest rates over the next couple of quarters, as manufacturing is one of the sectors most sensitive to higher borrowing costs.
Some survey respondents mentioned that higher rates are already affecting new construction projects.
For now, the significant inventory buildup during the summer could help ease some of the pressure in the coming months.
One of those pressures is rising prices. The prices paid subindex jumped 6.8 points to 77.9, the highest level since May, as the second round of the energy shock took hold in September.
Overall, the data suggest that the Fed could do more to keep inflation in check, as the currently strong economy has room to absorb more tightening.
Inside the data
- Production eased to 56.7 from 58.3, its 11th straight month of growth, while employment rose to 52.7 from 51.2.
- Supplier deliveries slowed for a 10th consecutive month at 59.0, down slightly from 59.3.
- Inventories fell to 48.6 from 50.6, back in contraction, and customers’ inventories dropped to 41.6 from 42.8, deeper into “too low” territory.
- The backlog of orders index jumped to 56.4 from 51.8. New export orders fell to 50.9 from 53.2, and imports slipped to 51.0 from 52.5.
