trending Market Intelligence /marketintelligence/en/news-insights/trending/koR3zGYCdO849N3zR29v2g2 content esgSubNav
In This List

US manufacturing index hits 10-year low as sector falls further into contraction

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


US manufacturing index hits 10-year low as sector falls further into contraction

The U.S. manufacturing sector unexpectedly fell deeper into contraction territory in September as global trade tensions weighed on new export orders, according to new survey data from the Institute for Supply Management.

The closely watched ISM manufacturing purchasing managers' index, or PMI, declined to a seasonally adjusted reading of 47.8% in September from 49.1% in the prior month, marking the lowest reading since June 2009.

The consensus estimate of economists polled by Econoday was for an index reading of 50.0% in September. Readings above 50% indicate an overall expansion in the manufacturing sector.

New export orders dropped to an index reading of 41.0% from 43.3% in August, posting the lowest reading since March 2009 and the third straight month of contraction. The production index declined to 47.3% from 49.5% and the employment index reached its lowest level since January 2016, falling to 46.3% from 47.4%.

"Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019," said Timothy Fiore, chair of the Institute for Supply Management's manufacturing business survey committee.

Only three of the 18 manufacturing industries reported growth last month, according to ISM.

The plunge in manufacturing activity reinforces the need for further action from the Federal Reserve, according to a research note from James Knightley, chief international economist at ING. He maintained his forecast for rate cuts of 25 basis points each in December and in the first quarter of 2020.

Separately, IHS Markit reported that its seasonally adjusted U.S. manufacturing PMI posted a final reading of 51.1 for September, the highest level in five months, indicating a slight improvement in business operating conditions. A reading above 50 indicates an overall monthly increase.

However, IHS Markit noted that export sales declined at the second-fastest rate in nearly five years, as trade tensions worsened external demand conditions.

The latest PMI reading also indicates that a "manufacturing recession" seems to have extended into its third quarter, according to IHS Markit Chief Business Economist Chris Williamson.

Williamson said it is unclear if the trend would improve in the fourth quarter, noting that business sentiment about the year ahead is stuck at "gloomy" levels.