Commenting on the Institute for Supply Management's (ISM) latest report on manufacturing in the U.S. economy, Timothy Fiore, chairman of the committee responsible for the report released Tuesday, said:
U.S. manufacturing activity contracted again in September, but at the same pace as last month.
Demand remains weak and production is declining….
The new order index is still in the contraction zone…
New export order index will be contracted at a faster pace….
The backlog index remains in strong contraction territory….
Output (measured by the production and employment indices) continued to contract….
Employment contracted at a faster pace.
“Business is flat”
Executives surveyed by ISM were similarly candid.
• “Business is flat. We are waiting for lower interest rates and the election results in November before confirming our plans for 2025. We are currently planning to flatten in 2025.” (Furniture and related products)
• “Our sales continue to be flat. Our customers tell us that while our products perform very well, they need to find lower-cost components to maintain sales.” (textile factory)
• “Sales slowed this quarter compared to the same period last year. We will adjust production accordingly.” (Other manufacturing)
• “We're not adding new jobs. Automotive original equipment manufacturers (OEMs) are starting to delay or cancel orders. The pace is slowing.” (Primary Metals)
Manufacturing in the U.S. economy has been slowing since October 2023, with 11 of the 12 monthly reports since then reflecting an economic downturn, according to ISM. The only bright spot was in May, when purchasing managers' reports briefly rose in levels indicating contraction.
“disappointing”
After reviewing today's report from ISM, Moody's chief business economist Chris Williamson said it was “disappointing”.
The September PMI survey released a number of disappointing economic indicators regarding the health of the US economy. Factories reported the biggest decline in monthly production in 15 months as new orders slumped, and jobs and raw material purchases fell further as producers scaled back operating capacity.
The report comes as the U.S. economy faces additional challenges. Hurricane Helena currently ranks among the top five worst hurricanes in U.S. history, causing more than $110 billion in damage to the eastern United States. This is on top of the $25 billion each caused by hurricanes Beryl and Debbie earlier this year.
Union strikes have also shut down 36 U.S. ports, including those between New York and New Jersey and between Houston and Galveston, putting an estimated 50,000 workers out of work. The risks to the retail supply chain are significant and could impact Thanksgiving and Christmas holiday shopping. Wage increases demanded by unions would be reflected in price increases at Walmart, Lowe's, Home Depot, IKEA and Amazon.
The United Maritime Alliance has proposed to the union a nearly 50% wage increase, triple employer contributions to workers' retirement plans and increase health care options.
The union rejected the offer. The International Longshoremen's Association is demanding a 77% wage increase. Over the next six years, workers' wages will increase from the current $81,120 a year to about $143,520.
Higher prices also occur. And there is a possibility that there will be shortages. GlobalData's Neil Saunders said in a message to the Daily Mail. Grace Zwemer, an economist at Oxford Economics, said unless the strike is resolved soon, the cost to the economy could reach $7 billion a week.
detail
In September, the PMI (Purchasing Managers' Index) remained below 50 for the sixth consecutive month, indicating economic contraction.
Eight out of 13 industries reported a slowdown in September.
The new orders index remained below 50 in September.
The company's employment indicators fell in September, “as companies seek to properly deploy employees at levels that match demand.” and
ISM's factory index has been in contraction territory for 22 of the past 23 months.
under the trump administration
Salaries increased faster than inflation. After inflation, incomes for all workers increased by 8.4%. The stock market set a new record, with the S&P 500 index up 67.5% in four years. Home ownership increased. Carbon emissions from energy consumption decreased by 11.3%. Handgun production increased by 12.5%, the highest level since 1997. And Trump added three justices to the Supreme Court, filling 30 percent of the appellate courts and a quarter of the district court seats with constitutional conservatives.
