The Institute for Supply Management released its monthly manufacturing Purchasing Managers Index (PMI) on Nov. 1 reflecting October activity, which showed weaker results following a flat September.

The PMI — regarded as a reliable indicator of overall U.S. industrial economic health — was down 0.7 percentage points at 46.5% from September’s 47.2%. It was its lowest reading in 15 months (46.4% in July 2023) and indicated a slower industrial economy during October. More granularly, the latest report indicated that demand continued to be weak, output declined and inputs stayed accommodative.

The October PMI reading indicated contraction (anything below 50.0%) for the seventh consecutive month.

Here’s how that’s looked in bar chart form since June 2023.

source: tradingeconomics.com

Of the October PMI’s 10 factoring indexes, seven ended the month in contraction territory. The figure was driven down by declines of 3.6 points in production, 1.8 points in backlog of orders and 0.2 points in supplier deliveries, offset by increases of 6.5 points in prices, 1.0 points in new orders and 0.5 points in employment.

“Demand remains subdued, as companies continue to show an unwillingness to invest in capital and inventory due to concerns (for example, inflation resurgence) about federal monetary policy direction in light of the fiscal policies proposed by both major parties,” ISM Manufacturing Business Survey Committee Chairman Timothy Fiore said in the October report. “Production execution eased in October, consistent with demand sluggishness. Suppliers continue to have capacity, with lead times improving and some shortages reappearing.

Fiore added that 63% of manufacturing GDP contracted in October, down from 77% in September. The share of sector GDP registering a composite PMI calculation at or below 45% — considered a good barometer of overall manufacturing weakness — was 46% in October, a 5-point increase from September.

The five manufacturing industries reporting growth in October were: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Computer & Electronic Products; and Miscellaneous Manufacturing.

The 11 industries reporting contraction in October were: Textile Mills; Printing & Related Support Activities; Transportation Equipment; Chemical Products; Electrical Equipment, Appliances & Components; Machinery; Primary Metals; Nonmetallic Mineral Products; Plastics & Rubber Products; Fabricated Metal Products; and Paper Products.

ISM PMI Respondent Commentary

• “Right-sizing continues. Contingency plans have been formulated to anticipate trade policies that will impose tariffs on key materials.” [Chemical Products]
• “Market demand has significantly decreased in the second half of 2024 and is expected to be soft through the first quarter of 2025. Although inflation has stabilized and returned to historical levels, and interest rates are decreasing, there appears to be a general pessimism in the economy that is driving customers to be more restrictive in their capital expenditures, including investment in commercial vehicles. Uncertainty in the outcome of the upcoming election has resulted in several risk analysis studies to be prepared, particularly focused on the future of the electric vehicle (EV) migration and trade restrictions/penalties.” [Transportation Equipment]
• “Heavy volumes for October have been extended into November to cover our record-breaking sales volume for this quarter.” [Food, Beverage & Tobacco Products]
• “Business is picking up; outlook is optimistic, but not great.” [Computer & Electronic Products]
• “Sales have been very slow the past six months. Interestingly, though, inquiries are up more than 30 percent from a year ago. This indicates there is pent-up demand, but customers are skittish about national and global economic conditions. We are hearing directly from customers that they need to order equipment to satisfy their requirements but are going to keep projects as long as possible before pulling the trigger.” [Machinery]
• “Business levels remain depressed. It feels like a ‘wait and see’ environment regarding where the economy is heading; customers don’t want to commit to inventory, which is resulting in lower order levels.” [Fabricated Metal Products]
• “Overall projections are that business will remain strong through the fourth quarter. Some order increases are starting, and a lot more projects are slated for the first quarter of 2025. Will demand be there to support it?” [Nonmetallic Mineral Products]
• “This has been an interesting fourth quarter already. The port strikes, hurricanes and election will all affect us in some way. Our industry is energy intensive, so our largest concern is the national and state mandates toward electrification. Electrical components were already in short supply, and with the substation and power line damages, we expect the electrical supply chain will be even worse. Components for green energy projects will be further delayed, but we don’t expect the environmental mandates to be delayed.” [Paper Products]
• “The potential port strike sent ripple effects through our industry. We have several large imports occurring in January, which created anxiety around critical components being delivered on time for a large, planned capital project. The three recent hurricanes missed large manufacturing hubs on the Gulf Coast but have still caused minor delays.” [Petroleum & Coal Products]
• “The seasonal business cycle is as planned: Consumer confidence in building materials remains relatively strong, and expectations are for continued growth into 2025 due to reduced interest rates and the potential for further small cuts.” [Wood Products]