The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) rebounded in September after unexpectedly contracting in August. The composite index rose from 49.4 in August to 51.5 in September, expanding for the sixth time in the past seven months. This was encouraging news, and a sign that the August reading were a bit of an outlier. Indeed, new orders (up from 49.1 to 55.1) recovered strongly, with modest growth in production (up from 49.6 to 52.8) and exports (down from 52.5 to 52.0). Despite the easing in exports, international demand has expanded for seven consecutive months. The sample comments also tended to echo the better data in September, even as respondents continued to cite ongoing challenges.
Along those lines, manufacturers remain guarded overall – as seen in the most recent NAM Manufacturers’ Outlook Survey – even as they are cautiously optimistic about activity moving forward. This caution can mostly be seen in the labor market data. Employment (up from 48.3 to 49.7) stabilized somewhat in this report, but hiring remained negative for the third straight month or the tenth time in the past 12 months. It speaks to the hesitance that many manufacturing business leaders have about adding new workers, at least for now. If demand and output continue to expand strongly, employment variables will likely improve. Meanwhile, inventories (up from 49.0 to 49.5) contracted for the 15th consecutive month. The silver lining is that this could provide a stimulative effect for growth in the coming months, as manufacturers will need to increase production to meet additional demand, with stockpiles quite low. Source: Shopfloor
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