Despite Rise in Orders, October PMI Slides to Just Above Breakeven

The Institute for Supply Management’s latest Manufacturing Purchasing Managers Index (PMI) — regarded as a reliable barometer for the health of the U.S. manufacturing sector — retreated further in October to a mark of 50.2% — narrowly above breakeven for expansion. While in expansion territory for the 29th consecutive month, it was 0.7 percentage points from September and remained the lowest reading since May 2020’s 43.5%.

It was the PMI’s seventh consecutive monthly decrease.

After riding high from the second half of 2021 through the middle of 2022, the PMI has steadily decreased in recent months. It was as high as 60.8 in October 2021 and held steady in the mid-50s through May 2022 (56.1) before sliding to 53.0, 52.8 and 52.8 during June, July and August, respectively until September’s new low point.

For the index, any reading above 50.0 indicates expansion and anything below that indicates contraction. 

“The U.S. manufacturing sector continues to expand, but at the lowest rate since the coronavirus pandemic recovery began,” noted Timothy Fiore, CPSM, C.P.M. and chair of the ISM Manufacturing Business Survey Committee. ”With panelists reporting softening new order rates over the previous five months, the October index reading reflects companies’ preparing for potential future lower demand.” Of the PMI”s six biggest manufacturing industries tracked — three; Machinery, Petroleum & Coal Products; and Transportation Equipment — registered moderate-to-strong growth in October, down from four in September.

Eight total manufacturing industries reported growth in October, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Machinery; Petroleum & Coal Products; Transportation Equipment; Miscellaneous Manufacturing; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. 

The 10 industries reporting contraction in October compared to September, in the following order, were: Furniture & Related Products; Wood Products; Paper Products; Textile Mills; Printing & Related Support Activities; Fabricated Metal Products; Chemical Products; Primary Metals; Computer & Electronic Products; and Food, Beverage & Tobacco Products.

MANUFACTURING AT A GLANCE

October 2022

“Panelists’ companies continue to carefully manage hiring, month-over-month supplier delivery performance was the best since March 2009, and the Prices Index indicated decreasing prices for the first time since May 2020,” Fiore added. “Like in September, mentions of large-scale layoffs were absent from panelists’ comments, indicating companies are confident of near-term demand. As a result, managing medium-term head counts and supply chain inventories remain primary goals. With the decline in the Backlog of Orders Index, buyers and sellers will begin to shore up order books and order streams to reduce share loss in the medium-to-long term.”