Signs of slippage continue in monthly manufacturing report

The Institute for Supply Management's (ISM) Manufacturing Report on Business for October revealed yet another slippage in numbers. The October Purchasing Managers Index (PMI) registered 50.1%, a decrease of 0.1% from September (50.2%). While fractional, it is nevertheless a drop that continues to signify slow going in the manufacturing sector.
"Comments from the panel reflect concern over the high price of the dollar and the continuing low price of oil, mixed with cautious optimism about steady to increasing demand in several industries," said Bradley J. Holcomb, CPSM, CPSD, Chair of the ISM Manufacturing Business Survey Committee.

The New Orders Index was actually up 2.8 percentage points to 52.9%, showing a nice uptick in growth. The Production Index was also up by 1.1% to 52.9%, both giving a ray of optimism over September's report. Despite those two positive notes, the Employment Index was down 2.9% to 47.6% from September's 50.5%, a slip into contracting territory. That may be a reflection of the continued struggle to find skilled workers. One respondent from the fabricated metal products sector commented: "Business is improving. We still need young machinists to replace those retiring."

Supplier Deliveries indicated a slowing from 50.2% in September to 50.4% in October; the Inventories Index contracted further from September's 48.5% to 46.5% in October. The Customers' Inventories Index also shows a slowing from 54.5% in September to 51.0% in October. However, one respondent in the plastics and rubber products sector commented that as the perception that raw material prices have "bottomed out," customer backlogs are increasing.

Speaking of costs, the Prices Index bumped up 1.0% from 38.0% in September to 39.0% in October but remains on the contracting side of the ISM Index. Order Backlog was also up 1.0%, from 41.5% in September to 42.5% in October, a welcome increase but it also remains on the contracting side of the equation.

Of the 18 manufacturing industries tracked by the ISM Manufacturing Committee, seven reported growth in October, fabricated metal products being one of those. Plastics and rubber reported a contraction in October.