Manufacturers see slower growth in October

Manufacturing growth weakened in October from September, while prices fell and manufacturers faced uncertainties in medium to long-term demand, the company said Institute for Procurement Management (ISM).

The ISM on Tuesday (1 November) released the ISM Manufacturing October Annual Report, which showed the Purchasing Managers’ Index (PMI) fell 0.7 percentage points from September to 50.2%. A value above 50% indicates that manufacturing is growing.

Orders fell, production rose and backlogs fell, according to the October report. Supplier shipments were accelerating, raw material stocks were growing and customers’ inventories were running low. Prices fell, exports fell and imports rose.

“US manufacturing continues to expand, but at the slowest rate since the coronavirus pandemic recovery began,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. “With panellists reporting falling new orders over the past five months, the October index reading reflects that companies are preparing for potentially lower demand going forward.”

Business Survey Committee panelists’ companies are managing employment levels through hiring freezes and turnover amid uncertainty in medium- and long-term demand, Fiore said, noting that buyers should be encouraged by the drop in prices. The following three manufacturing industries reported moderate to strong growth in October: machinery, petroleum and coal products, and transportation equipment.

“Production expanded for April 29th even month in October,” Fiore said. “Panelist companies continue to be diligent in hiring, supplier delivery performance month-on-month was the best since March 2009, and the price index showed falling prices for the first time since May 2020. As mentioned in September, mass layoffs were absent from panelists’ comments, suggesting that companies are confident in near-term demand. As a result, managing mid-term workforce and supply chain inventories remain priority objectives. As the backlog index falls, buyers and sellers will begin to support order books and order flows to reduce stock losses in the medium to long term.”

The following are comments from respondents:

In the computer and electronic products industry, one respondent noted “continued challenges in the electronics market” and “slow business activity”. A chemical industry respondent said: “Customers are canceling some orders. Stocks of finished goods increase. Expect some recovery as some customers may be waiting for commodity prices to fall further.”

Respondents in the plastics and rubber products and other manufacturing industries reported falling prices. “Suppliers are trying to stem declines, but competition is increasing,” said the manufacturing respondent.

Other respondents reported a slowdown in orders and customer demand while supply chain and labor issues have eased. One transportation equipment industry respondent said, “Order levels are slowing after last month’s pent-up demand.”

The decline in the housing market is affecting the electrical appliance, appliance and component industry. One industry respondent said, “Capacity has increased over the past two years due to high orders for consumer goods and appliances, so we are now trying to push our orders with promotions to the point where we can use our full capacity.”

A food, beverage and tobacco industry respondent said the “growing threat of a recession is causing many customers to significantly delay their orders.” The Russian invasion of Ukraine is also contributing to global uncertainty and affecting global commodity markets. And a respondent from the non-metallic mineral products industry said: “International conditions are at the forefront and appear to be very grim. Overall, we still assume that 2023 will be a positive year with at least moderate growth.”

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