U.S. ISM Manufacturing Index (October 2024)

The ISM manufacturing index steps back in October

• The ISM Manufacturing Index fell to 46.5 in October from 47.2 last month and short of the expected 47.6 print. As has been the case since July, only 5 of 18 industries reported growth for the month. However, as two of the six largest industries reported growth, the share of manufacturing GDP contracting fell to 63% (from 77% in September).
• Demand conditions remain soft. Although, the new orders index improved for the third consecutive month, it continues to signal contraction (47.1), while new export orders (45.5) and backlogs (42.3) both continue to reflect shrinking demand.
• The production index gave back much of last month's gains, falling 3.6 percentage points to 46.2, while the pace of contraction in employment was relatively unchanged (44.4 from 43.9 last month).
• Last month's contraction in prices appears to have been temporary, with the index signaling rising prices for the ninth time since the start of the year (54.8).  

Key Implications

• A slight softening in the manufacturing sector last month. New demand shrank yet again, while the contraction in output picked up steam. Moreover, the relief on input prices that came in September appears to have been a temporary blip.
• This morning's payrolls report already signaled a tough month for the manufacturing sector with the effects of the ongoing strike at Boeing and hurricanes Helene and Milton likely impacting activity in the sector. Longer-term, data suggest that inflation pressures are fading, allowing the Fed to gradual ease monetary policy. Lower rates into 2025 should help the sector find its footing and turn a corner.  

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