Economy

ISM PMI Retreats Slightly in October

November 2, 2017

U.S. manufacturing slowed a bit from September but remained robust in October, according to the latest Manufacturing ISM Report on Business from the Institute for Supply Management. The headline PMI registered 58.7 percent, a 2.1 percentage point decrease from September’s score of 60.8 percent. A reading above 50 indicates growth. Comments from respondents suggest that at least some of the weakness may be due to the impacts from the recent hurricanes.

All of the components of the index weakened last month. Orders and production both declined 1.2 percentage points, but remained firmly positioned in expansion territory. New orders registered 63.4 percent and production 61.0 percent.

“New order expansion continues at a strong pace, consistent with pre-hurricane levels,” said Timothy Fiore, chairman of ISM’s Manufacturing Business Survey Committee. “Production expansion continues at a strong pace in spite of supply chain difficulties including the reduction of inventory levels seen during the period.”

Raw materials inventories contracted in October, falling 4.5 percentage points to 48 percent. Customer inventories increased 1.5 points, but were still at a level considered “too low.” Supplier deliveries fell 3 percentage points. Backlogs were strong in October, but decreased 3 points to 55 percent.

Higher prices were noted in many areas including steel, stainless and aluminum.

Export orders inched lower in October, dipping 0.5 points to 56.5. The index for imports was unchanged at 54 percent.

The employment index was nearly flat at 58.8 percent in October, a decline of 0.5 points. “Employment levels remain strong, consistent and in keeping pace with production output,” said Fiore.

Respondent comments include:

“Raw material costs are on the rise, but our purchasing operation has navigated shortages caused by hurricanes.” (Chemical Products)
“Incoming orders are strong, mainly due to recovery efforts in the wake of Hurricanes Harvey and Irma. Backlogs are up due to operating inefficiencies.” (Machinery)
“Hurricanes have caused shortages in the resin market, resulting in price increases, inventory constraints and increased lead times.” (Computer & Electronic Products)
“Ongoing market growth. Minimal impact expected from hurricanes so far this season.” (Miscellaneous Manufacturing)
“Business seems to be a bit depressed due to the storms last month, but is picking back up.” (Fabricated Metal Products)
“Business continues to be better than expected.” (Transportation Equipment)

ISM calculates its manufacturing PMI based on a monthly survey of manufacturing supply executives across the country. Survey responses reflect the change in the current month compared to the previous month.

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