U.S. ISM Manufacturing Index (September 2024)

Manufacturing Index unchanged in September  

• The ISM Manufacturing Index was unchanged in September, holding at 47.2 and a smidge below expectations for a 47.5 print. As in July and August, only five of 18 industries reported growth for the month, but as only one of the six largest industries grew, a greater share of manufacturing GDP contracted (77% vs. 65% in August).
• Demand conditions remain soft. Although, the new orders index improve marginally for the month (46.1 from 44.6) it, along with new export orders, continues to signal a contraction. Backlogs or Orders also shrank at roughly the same pace as the month prior (44.1 vs 43.6).
• One silver lining is that the production index rose 5 percentage points to 49.8 – close to the breakeven level. However, employment conditions deteriorated further in September, signaling a faster clip of contraction.
• Last month's uptick in prices has faded, with the index falling back into contraction (48.3) for the first time since December 2023.  

Key Implications

• Not much change from last month in the manufacturing sector. New demand continues to shrink, and payrolls are coming under pressure again.
• While the report paints a challenging picture for the sector, there are some reasons for optimism. The prices paid index signaled falling raw materials prices for the first time since late last year. Combined with the Fed embarking on its rate cutting cycle, there are some glimmers of optimism for a sector that has struggled under the weight of higher interest rates.  

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