Fluid Power Journal

US Manufacturing PMI for September 2023 Contracts to 49%

From the Institute of Supply Management.

(Tempe, Arizona) — Economic activity in the manufacturing sector contracted in September for the 11th consecutive month following a 28-month period of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The Manufacturing PMI® registered 49 percent in September, 1.4 percentage points higher than the 47.6 percent recorded in August. The overall economy expanded weakly after nine months of contraction following a 30-month period of expansion. (A Manufacturing PMI® above 48.7 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index remained in contraction territory at 49.2 percent, 2.4 percentage points higher than the figure of 46.8 percent recorded in August. The Production Index reading of 52.5 percent is a 2.5-percentage point increase compared to August’s figure of 50 percent. The Prices Index registered 43.8 percent, down 4.6 percentage points compared to the reading of 48.4 percent in August. The Backlog of Orders Index registered 42.4 percent, 1.7 percentage points lower than the August reading of 44.1 percent. The Employment Index registered 51.2 percent, up 2.7 percentage points from the 48.5 percent reported in August.

“The Supplier Deliveries Index figure of 46.4 percent is 2.2 percentage points lower than the 48.6 percent recorded in August. (Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

“The Inventories Index increased by 1.8 percentage points to 45.8 percent; the August reading was 44 percent. The New Export Orders Index reading of 47.4 percent is 0.9 percentage points higher than August’s figure of 46.5 percent. The Imports Index remained in contraction territory, registering 48.2 percent, 0.2 percentage point higher than the 48 percent reported in August.”

Fiore continues, “The U.S. manufacturing sector continued its contraction trend but at a slower rate, recording its best performance since November 2022, when the PMI® also registered 49 percent. Companies are still managing outputs appropriately as order softness continues, but the month-over-month PMI® improvement in September is a clear positive. 

Demand eased marginally, with the (1) New Orders Index contracting, though at a slower rate, (2) New Export Orders Index continuing in contraction territory but with a marginal increase, and (3) Backlog of Orders Index declining. The Customers’ Inventories Index reading indicated improved supply chain efficiency, as output improved and customers’ inventories continued to decline. 

Output/Consumption (measured by the Production and Employment indexes) was positive, with a combined 5.2-percentage point upward impact on the Manufacturing PMI® calculation. Panelists’ companies improved production compared to August and continued to manage head counts, primarily through attrition and hiring freezes. 

Inputs — defined as supplier deliveries, inventories, prices, and imports — continued to accommodate future demand growth. The Supplier Deliveries Index indicated faster deliveries for the 12th straight month, at a faster rate compared to August, and the Inventories Index remained in contraction territory, but improved month over month. The Prices Index remained in ‘decreasing’ territory, 4.6 percentage points lower than the August reading, signifying a return to price reductions, but energy costs in August and September could possibly affect future material costs. Manufacturing supplier lead times continue to decrease but at a slow pace.

“Of the six biggest manufacturing industries, two — Food, Beverage & Tobacco Products; and Petroleum & Coal Products — registered growth in September.

“Demand remains soft, but production execution improved compared to August as panelists’ companies prepared for the fourth quarter and the close of the fiscal year. Suppliers continue to have capacity. Seventy-one percent of manufacturing gross domestic product (GDP) contracted in September, up from 62 percent in August. More importantly, the share of sector GDP registering a composite PMI® calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 6 percent in September, compared to 15 percent in August and 25 percent in July, a clear positive,” says Fiore.

The five manufacturing industries that reported growth in September are: Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Textile Mills; Primary Metals; and Petroleum & Coal Products. 

The 11 industries reporting contraction in September — in the following order — are: Printing & Related Support Activities; Furniture & Related Products; Plastics & Rubber Products; Paper Products; Fabricated Metal Products; Wood Products; Computer & Electronic Products; Machinery; Electrical Equipment, Appliances & Components; Chemical Products; and Transportation Equipment.

Manufacturing at a Glance

September 2023

Index Series Index Sep Series Index Aug Percentage Point Change Direction Rate of Change Trend* (Months)
Manufacturing PMI® 49.0 47.6 +1.4 Contracting Slower 11
New Orders 49.2 46.8 +2.4 Contracting Slower 13
Production 52.5 50.0 +2.5 Growing From Unchanged 1
Employment 51.2 48.5 +2.7 Growing From Contracting 1
Supplier Deliveries 46.4 48.6 -2.2 Faster Faster 12
Inventories 45.8 44.0 +1.8 Contracting Slower 7
Customers’ Inventories 47.1 48.7 -1.6 Too Low Faster 4
Prices 43.8 48.4 -4.6 Decreasing Faster 5
Backlog of Orders 42.4 44.1 -1.7 Contracting Faster 12
New Export Orders 47.4 46.5 +0.9 Contracting Slower 4
Imports 48.2 48.0 +0.2 Contracting Slower 11
OVERALL ECONOMY Growing From Contracting 1
Manufacturing Sector Contracting Slower 11

Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.
*Number of months moving in current direction.

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