U.S. manufacturing contracts for a third straight month

GP: Steel Manufacturing and Welding 180807
A man using an angle grinder on a steel piece at a metal fabrication company on August 7, 2018
in Orange County, New York. Waring Abbott | Getty Images

A gauge of U.S. manufacturing showed the sector continued to contract in October, the third straight month of slowdown amid global trade uncertainties.

The purchasing manufacturing index from the Institute for Supply Management came in at 48.3% last month, compared with a 47.8% reading in September. But it was below economists’ expectations of 49.1%. A number below 50% represents a contraction in the industry. A six-week strike of General Motors workers during the month might have muddied the reading.

The sector showed its first contraction in a few years in August, ending a 35-month expansion period where the PMI averaged 56.5%, according to ISM. The manufacturing gauge had its lowest reading since June 2009 in September as exports dived amid the escalated trade war.

The continuing contraction showed the challenging environment U.S. manufacturers are faced with amid the escalated trade war between the U.S. and China. Manufacturing was once considered a big winner under the Trump administration with improvements in employment and activity over the past few years.

“Comments from the panel reflect an improvement from the prior month, but sentiment remains more cautious than optimistic,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.

The production index was only 46.2% in October, compared to the September reading of 47.3%. The backlog of orders index was 44.1%, contracting for the sixth straight month, versus the September reading of 45.1%, according to ISM.

Prices decreased for the fifth consecutive month and at a faster rate with the prices index registered 45.5% in October.

“Inputs — expressed as supplier deliveries, inventories and imports — were again lower in October, due primarily to supplier delivery contraction offset by improvements in inventories,” Fiore said.

However, the latest report also showed signs of recovery, making some on Wall Street believe the manufacturing slowdown won’t be accelerating. New orders, employment and inventories all showed improvement last month.

“The outlook for nation’s factories isn’t growing any worse and the manufacturing recession isn’t intensifying,” Chris Rupkey, chief financial economist at MUFG, said in a note. “There are even some green shoots for the manufacturing sector as orders are picking up and orders lead the way forward for production and output and jobs.”

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