U.S. manufacturing gauge drops to lowest level in six months

SEVERAL U.S. MANUFACTURING indicators declined in October. / BLOOMBERG NEWS FILE PHOTO/TY WRIGHT
SEVERAL U.S. MANUFACTURING indicators declined in October. / BLOOMBERG NEWS FILE PHOTO/TY WRIGHT

NEW YORK – A gauge of United States manufacturing fell by more than forecast to a six-month low, as orders and hiring cooled amid escalating trade tensions with China, data from the Institute for Supply Management showed Thursday.

Highlights of ISM manufacturing (October)

  • Factory index dropped to 57.7 (estimated 59) from 59.8 in prior month; readings above 50 indicate expansion
  • Measure of new orders fell to 57.4 from 61.8; two-month decline of 7.7 points is steepest since Jan. 2015
  • Export orders gauge decreased to 52.2, lowest since Nov. 2016, from 56
  • Employment index declined to 56.8 from 58.8

Key takeaways

The report may add to concerns that President Donald Trump’s trade war with China is starting to inflict more pain on manufacturing even as the industry continues to expand. The export-orders gauge fell for the third time in four months, while new orders decelerated for the fourth month in five.

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Elevated price pressures and a pickup in measures of backlogs and supplier deliveries show lingering supply-chain bottlenecks. Disruptions and data volatility related to major storms in September and October also may have played a role.

Some of the results may reflect an unwinding of gains from previous months when manufacturers were rushing to purchase materials and export their products ahead of U.S. tariffs and counter-levies by China. Trump has threatened to raise the tariffs further and on more products.

Analysts are also monitoring factory reports to assess whether the tax-cut-driven boost to business investment may be fading. Figures last week showed corporate spending on equipment cooled in the third quarter to the slowest pace of gains since 2016. Meanwhile, the job market remains solid, and the October jobs report due Friday is projected to show manufacturing payrolls climbed.

Other details

  • Production index decreased to 59.9 from 63.9; biggest decline since March 2017
  • Measure of prices paid jumped to 71.6 from 66.9, first increase in five months
  • Gauge of supplier deliveries rose to 63.8 from 61.1; shows lead times lengthening
  • Index of backlogs at 55.8 after 55.7; inventories slid to 50.7, lowest since May, from 53.3

Shobhana Chandra is a reporter for Bloomberg News.