United States manufacturing activity grew at its slowest pace in nearly two and a half years in September as new orders contracted while interest rates were aggressively hiked to cool demand and tame inflation.
The Institute for Supply Management (ISM) said on Monday that its manufacturing purchasing managers’ index or PMI dropped to 50.9 in September, the lowest reading since May 2020, from 52.8 in August. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9 percent of the US economy.
The ISM survey’s forward-looking new orders subindex fell to 47.1 last month, also the lowest reading since May 2020, from 51.3 in August. It was the third time this year that the index has contracted. Order backlogs are also being whittled down. While that pointed to a further slowdown in manufacturing, it was also a function of easing bottlenecks in the supply chain.
The ISM’s measure of supplier deliveries fell to 52.4 from 55.1 in August. A reading above 50 percent indicates slower deliveries to factories.
With supply chains loosening, inflation pressures at the factory gate continued to subside.
A measure of prices paid by manufacturers dropped to 51.7, the lowest reading since June 2020, from 52.5 in August. The continued slowdown is being driven by retreating commodity prices. Annual consumer and producer inflation decelerated in August, raising hope that prices had peaked.