Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       

Blog Home
   Brian Wesbury
Chief Economist
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
X •  LinkedIn
  The ISM Manufacturing Index Declined to 50.2 in October
Posted Under: Inflation • ISM • COVID-19
Supporting Image for Blog Post


Implications:  The manufacturing sector continued to expand in October, but at the slowest rate since the pandemic recovery began, with only eight of eighteen industries reporting growth.  Respondent comments in October were mainly focused on worries about the pace of future activity with some customers pulling back on new orders due to worries about an economic slowdown.  However, what was most notable about today’s survey responses was what wasn’t said. Specifically, the lack of comments related to supply chain issues which have plagued the manufacturing sector over the past few years. This was reflected in the data in today’s report as well.  While both the new orders and production indices posted increases in October (keeping the headline number out of contraction territory), new orders remained below 50.  This is hardly surprising given that consumers have been shifting their preferences away from goods and back toward services.  However, given that production remains in expansion, this is giving US factories time to catch up on all the existing orders they already have in the pipeline. The result is the first contraction in supply chain pressures in years. For example, the index for order backlogs fell to 45.3 in October, the first reading below 50 since the height of COVID worries in early 2020.  Meanwhile, the supplier deliveries index fell to 46.8, its first time in contraction territory since 2015. This means supply chain problems aren’t just getting worse at a slower rate, they are finally reversing. Meanwhile the employment index rebounded to 50.0 in October, signaling neither expansion nor contraction.  A majority of panelists in October have said they are beginning to take a pause on new hiring and allowing labor turnover to reduce headcount, a sign that a weaker outlook for new orders may finally be hurting demand for labor in the US factory sector.  Finally, the prices index in today’s report continued to signal that inflation pressures have likely peaked in the goods sector, falling for the seventh month in a row to 46.6, the first number below 50 since 2020. While lower prices for goods will help moderate overall inflation, we expect that the services sector will now be the main driver going forward, keeping price growth well above the Fed’s 2% target. In other news this morning, construction spending rose 0.2% in September, with large gains in manufacturing facilities and roads offsetting declines in healthcare and conservation projects.  The gain in construction suggests an upward revision to last week’s report that real GDP grew at a 2.6% annual rate in the third quarter.

Click here for PDF Version

Posted on Tuesday, November 1, 2022 @ 11:26 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.