Manufacturing expands for 10th straight month, but Iran war weighs heavily

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Economic activity in the U.S. manufacturing sector expanded in October for the 10th consecutive month to 55.5%, 1 percentage point higher than September, according to the Institute for Supply Management’s latest Purchasing Managers’ Index.

A figure below 50% indicates an industry in contraction. The overall economy grew for the 24th month in a row, ISM reported.

Meanwhile, the S&P Global U.S. Manufacturing PMI registered 54.9, down one point from September.

The Iran war and price volatility continue to weigh down the manufacturing sector despite 10 months of expansion, Susan Spence, chair of ISM’s Manufacturing Business Survey Committee, said on a call Monday. According to Spence, more respondents expressed concern about prices and other issues this month than in September.

“The increase in negative sentiment is really all about the inflationary pressures and the constraint in availability of raw materials, made worse by the Iran War and trade wars,” she said.

Five of the six largest manufacturing industries — machinery; computer and electronic products; transportation equipment; chemical products; and food, beverage and tobacco products — expanded in October.

The New Orders Index expanded for the 10th consecutive month after four straight readings in contraction, registering 55.5%, up 0.2 percentage points from September.

The Production Index registered 59% in October, or 2.3 percentage points higher than September.

The Prices Index remained in expansion, registering 75.2%, a 2.7-percentage point decrease compared to September’s reading of 77.9%.

The Backlog of Orders Index registered 54.6%, down 1.8 percentage points from September.

The Employment Index reading of 52.4% was down 0.3 percentage points from September’s. The manufacturing industry added 9,000 jobs in September.

The Supplier Deliveries Index indicated slowing performance for the 11th month in a row after one month in “faster” territory. The reading of 59.1% was up 0.1 percentage points from September. Supplier Deliveries is the only ISM PMI Report index in which a reading of above 50% indicates slower deliveries.

The Inventories Index returned to expansion and registered 51.4%, up 2.8 percentage points compared to September. The Customers’ Inventories Index reading remained level at 41.6%.

The New Export Orders Index gained 0.3 percentage points in October to 51.2%. The Imports Index registered 52.9%, up 1.9 percentage points from September.

Three of four demand indicators — new orders, backlog of orders and new export orders — remained in expansion, and the Customers’ Inventories Index stayed in ‘too low’ territory, contracting at the same rate as last month. A “too low” status for the Customers’ Inventories Index is usually considered positive for future production.

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