Manufacturing Stagnates in October on Weak Global Sales
American manufacturing remained stuck in neutral in October as factories struggled with dwindling overseas demand and well-stocked customers at home.
The Institute for Supply Management’s index was little changed at 50.1, the weakest since May 2013, after 50.2 in September, a report from the Tempe, Arizona-based group showed Nov. 2. A reading of 50 is the dividing line between expansion and contraction.
Soft global sales, a strong dollar that has made U.S. goods more expensive overseas, record first-half inventory growth and energy-sector woes have hounded the nation’s producers. At the same time, increased auto output in response to the best sales in a decade remains a bright spot for manufacturing.
A quick turnaround “isn’t likely,” Ryan Sweet a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “The weakness in manufacturing is going to linger. The strong dollar and weak global demand will remain headwinds.”
The median forecast in a Bloomberg News survey of economists called for an ISM reading of 50, with estimates ranging from 48.9 to 51.5.
The standstill in manufacturing is leading to fewer job opportunities on factory floors. The ISM group’s measure of employment decreased to 47.6 in October, the weakest reading since August 2009, from 50.5 a month earlier.
The index of export orders improved to 47.5 from 46.5, marking the fifth straight month of contraction.
While customers of producers made some progress in October trimming inventories as the index dropped to 51 from 54.5, last month’s reading was the third-highest since early 2009.
ISM’s report also showed the index of prices paid rose to 39 from 38.
The economy grew at a 1.5% annualized rate in the third quarter, hurt by an inventory correction, according to Commerce Department gross domestic product data released last week. Consumer spending climbed 3.2%, while further cutbacks on drilling rigs and mines resulted in a drop in investment in nonresidential structures.
Other indexes in the report signaled U.S. manufacturing is stabilizing. The new orders gauge climbed to 52.9 from 50.1, and a measure of production also rose to 52.9, from 51.8. The index for orders waiting to be filled contracted for a fifth straight month.
Automobile demand has helped bolster factory production. The GDP report showed motor vehicle output increased at a 14.9% annualized rate in the third quarter after a 14.5% advance.
Sales of cars and light trucks posted an 18.1 million annualized rate in September, the strongest since 2005, according to Ward’s Automotive Group.
