The Institute for Supply Management’s purchasing managers’ index for manufacturing activities dipped to 50.9 in September, its lowest level since May 2020, amid an economic slowdown in the United States as well as globally.
Inflation and a tighter monetary policy by central banks have pushed the global economy closer to a contraction. On top of that, the dollar continued to strengthen in September, making the demand for U.S. manufactured goods more expensive to foreign consumption.
The subindex for new orders in September dropped markedly to 47.1 from 51.3, implying contraction for the third time in the past four months. The subindex for export orders indicated contraction, falling to 47.8 on the month. Generally, except for the overall index, anything below 50 indicates contraction.
Also, the slowdown in activities was broad-based in September. Prices paid recorded by manufactured goods producers was down to 51.7, a significant drop from this year’s high of 87.1 in March.
With demand shifting from goods to services, the continuing decline in goods inflation should be good news for the Federal Reserve in its fight against inflation.
At the same time, the data on employment showed a further decline in job gains in the sector after an unexpected spike in August. September’s reading for manufacturing employment was 48.7, indicating a contraction.
As the economy heads toward an inevitable slowdown with the likelihood of a recession, the manufacturing sector is expected to be one the most vulnerable to interest rate hikes besides housing.